What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-09-06 compared with 2023-03-09 · 450 added, 499 removed, 312 unchanged (75% of the section changed)

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(“BNED”) is one of the largest contract operators of physical and virtual bookstores for college and university campuses and K-12 institutions across the United States.

We are also one of the largest textbook wholesalers, inventory management hardware and software providers, and a leading provider of digital education solutions.

We are also one of the largest textbook wholesalers, inventory management hardware and software providers.

We operate 1,289 physical, virtual, and custom bookstores and serve more than 5.8 million students, delivering essential educational content, tools and general merchandise within a dynamic omnichannel retail environment.

Additionally, we offer direct-to-student products and services to help students study more effectively and improve academic performance.

The strengths of our business include our ability to compete by developing new products and solutions to meet market needs, our large operating footprint with direct access to students and faculty, our well-established, deep relationships with academic partners and stable, long-term contracts and our well-recognized brands.

We expect to continue to introduce scalable and advanced digital solutions focused largely on the student, expand our e-commerce capabilities and accelerate such capabilities through our merchandising partnership with Fanatics Retail Group Fulfillment, LLC, Inc.

We provide product and service offerings designed to address the most pressing issues in higher education, including equitable access, enhanced convenience and improved affordability through innovative course material delivery models designed to drive improved student experiences and outcomes.

We offer our BNC First Day ® equitable and inclusive access programs, consisting of First Day Complete and First Day , which provide faculty required course materials on or before the first day of class at a discounted rate, as compared to the total retail price for the same course materials if purchased separately.

The BNC First Day discounted price is offered as a course fee or included in tuition.

During the first quarter ended July 29, 2023, BNC First Day total revenue increased by $16.7 million, or 37%, to $61.7 million compared to $45.1 million during the prior year period.

We expect to continue to introduce scalable and advanced solutions focused largely on the student and customer experience, expand our e-commerce capabilities and accelerate such capabilities through our merchandising partnership with Fanatics Retail Group Fulfillment, LLC, Inc.

(“Fanatics”) and Fanatics Lids College, Inc.

D/B/A "Lids" (“Lids”) (collectively referred to herein as the “F/L Partnership”), increase market share with new accounts, and expand our strategic opportunities through acquisitions and partnerships.

D/B/A "Lids" (“Lids”) (collectively referred to herein as the “F/L Partnership”), win new accounts, and expand our strategic opportunities through partnerships.

We expect gross general merchandise sales to continue to increase over the long term, as our product assortments continue to emphasize and reflect changing consumer trends, and we evolve our presentation concepts and merchandising of products in stores and online, which we expect to be further enhanced and accelerated through the F/L Partnership.

Through this partnership, we receive unparalleled product assortment, e-commerce capabilities and powerful digital marketing tools to drive increased value for customers and accelerate growth of our logo general merchandise business.

During the 13 weeks ended July 29, 2023, Retail Gross Comparable Store general merchandise sales increased by 5.3%.

The Barnes & Noble brand (licensed from our former parent) along with our subsidiary brands, BNC and MBS, are synonymous with innovation in bookselling and campus retailing, and are widely recognized and respected brands in the United States.

Our large college footprint, reputation, and credibility in the marketplace not only support our marketing efforts to universities, students, and faculty, but are also important to our relationship with leading publishers who rely on us as one of their primary distribution channels, and for being a trusted source for students in our direct-to-student digital solutions business.

For additional information related to our business, see Part I - Item 1.

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Financing Arrangements

On March 8, 2023, subsequent to quarter end, we amended our existing Credit Agreement to, among other things, extend the maturity date thereunder by six months to August 29, 2024.

The amendment also reduces the commitments under the Credit Agreement by $20 million to $380 million.

On March 8, 2023, subsequent to quarter end, we amended the Term Loan Credit Agreement to, among other things, extend the maturity date thereunder by six months to December 7, 2024.

During the 13 weeks ended July 29, 2023, we amended our existing Credit Agreement and Term Loan Agreement to, extend the maturity dates and modify various terms to provide additional liquidity.

For additional information, see Item 1.

Financial Statements - Note 7.

Subsequent Event.

Sale of DSS Segment

During the fourth quarter of Fiscal 2023, assets related to our Digital Student Solutions ("DSS") Segment met the criteria for classification as Assets Held for Sale and Discontinued Operations and is no longer a reportable segment.

On May 31, 2023, we completed the sale of these assets related to our DSS Segment for cash proceeds of $20 million, net of certain transaction fees, severance costs, escrow, and other considerations.

During the 13 weeks ended July 29, 2023, we recorded a Gain on Sale of Business of $3.1 million in Net Loss from Discontinued Operations related to the sale.

Net cash proceeds from the sale were used for debt repayment and provided additional funds for working capital needs under our Credit Facility.

For additional information, see Note 2.

Summary of Significant Accounting Policies.

Cost Savings Initiative

On December 2, 2022, the Board of Directors approved a company-wide initiative to drive efficiencies, streamline operations, simplify the organizational structure and further reduce non-essential costs.

These actions were substantially implemented in December 2022.

The Company incurred restructuring charges, primarily related to severance, of approximately $6 million in the third quarter of fiscal 2023 and, as a result, expects to save $10 million to $15 million in fiscal year 2023.

These initiatives are expected to provide annualized savings of $30 million to $35 million.

The restructuring charges are excluded from non-GAAP adjusted EBITDA and from the annualized and fiscal year 2023 savings.

We continue to focus on achieving efficiencies and reducing costs to further improve our operating performance.

First Day Inclusive and Equitable Access Programs

designed to drive improved student experiences and outcomes.

We offer our BNC First Day ® inclusive and equitable access programs, consisting of First Day Complete and First Day , in which course materials, including both physical and digital content, are offered at a reduced price through a course fee or included in tuition, and delivered to students on or before the first day of class.

• First Day Complete is adopted by an institution and includes all classes, providing students both physical and digital materials.

We have implemented a significant cost reduction program designed to streamline our operations, maximize productivity and drive profitability.

We have taken steps to significantly reduce our workforce, eliminated duplicate administrative headcounts at all levels, implemented improved system development processes to reduce maintenance costs, reduced capital expenditures, and evaluated operating contractual obligations for cost savings.

We have achieved meaningful cost savings from this program of approximately $17 million d uring the second half of the year ended April 29, 2023.

These initiatives are expected to provide annualized savings of $30 million to $35 million in Fiscal 2024.

Management's plans over the next twelve months include the further reduction of gross capital expenditures and other cost saving measures of approximately $25 million.

Management believes that these plans are within its control and probable of being implemented on a timely basis.

BNC First Day Equitable and Inclusive Access Programs

The BNC First Day discounted price is offered as a course fee or included in tuition.

• First Day Complete is adopted by an institution and includes all undergraduate classes (and on occasion graduate classes), providing students both physical and digital materials.

The First Day Complete model drives substantially greater unit sales and sell-through for the bookstore.

• Through First Day , digital course materials are adopted by a faculty member for a single course, and students receive their materials through their school's learning management system.

Offering courseware sales through our inclusive and equitable access First Day Complete and First Day models is a key, and increasingly important strategic initiative of ours to meet the market demands of substantially reduced pricing to students, as well as the opportunity to improve student outcomes, while, at the same time, increasing our market share, revenue and relative gross profits of courseware sales given the higher volumes of units sold in such models as compared to historical sales models that rely on individual student marketing and sales.

We expect these programs to allow us to ultimately reverse historical long-term trends in courseware revenue declines, which has been observed at those schools where such programs have been adopted.

• First Day is adopted by a faculty member for a single course, and students receive primarily digital course materials through their school's learning management system ("LMS").

Offering course materials through our equitable and inclusive access First Day Complete and First Day models is a key, and increasingly important strategic initiative of ours to meet the market demands of substantially reduced pricing to students, as well as the opportunity to improve student outcomes, while, at the same time, increasing our market share, revenue and relative gross profits of course material sales given the higher volumes of units sold in such models as compared to historical sales models that rely on individual student marketing and sales.

These programs have allowed us to reverse historical long-term trends in course materials revenue declines, which have been observed at those schools where such programs have been adopted.

We are moving quickly and decisively to accelerate our First Day Complete strategy.

We plan to move many institutions to First Day Complete for the Fall of 2023 and the majority of schools by Fall 2024.

As of January 28, 2023, 116 campus stores adopted our First Day Complete course materials delivery program for the 2023 Spring Term, representing approximately 580,000 in total undergraduate student enrollment (as reported by National Center for Education Statistics), compared to 76 campus stores representing approximately 380,000 in total undergraduate student enrollment or the 2022 Spring Term.

During the 13 weeks ended January 28, 2023, First Day Complete sales increased by $28.9 million to $66.9 million, or 76%, as compared to $38.0 million in the prior year period.

During the 39 weeks ended January 28, 2023, First Day Complete sales increased by $83.8 million to $173.4 million, or 94%, as compared to $89.6 million in the prior year period.

We plan to move many institutions to First Day Complete in Fiscal 2024 and the majority of our schools by Fiscal 2025, with continued relative adoption of this model thereafter.

In the Fall of 2023, 157 campus stores are utilizing First Day ® Complete representing enrollment of nearly 800,000 undergraduate and post graduate students (as reported by National Center for Education Statistics), an increase of approximately 46% compared to Fall of 2022.

During the 13 weeks ended July 29, 2023, First Day Complete sales increased by $9.1 million, or 55%, to $25.5 million as compared to $16.5 million in the prior year period.

During the 13 weeks ended July 29, 2023, First Day sales increased by $7.7 million, or 27%, to $36.3 million as compared to $28.6 million in the prior year period.

Partnership with Fanatics and Lids

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Lids manages in-store assortment planning and merchandising of emblematic apparel, headwear, and gift products for our partner campus stores, and Lids owns the inventory it manages, relieving us of the obligation to finance inventory purchases from working capital.

COVID-19 Business Impact

Our business has been significantly negatively impacted by the COVID-19 pandemic, as many schools adjusted their learning models and on-campus activities.

However, on campus traffic continues to grow from increased campus events and activities, as compared to the last two years.

Our third quarter 2022 results were negatively impacted by a Covid variant experienced on campuses across the country during the 2022 Spring Term which did not recur during the 2023 Spring Term.

While the impact of the COVID-19 pandemic is lessening, we cannot accurately predict the duration or extent of the impact of the COVID-19 virus, including variants, on enrollments, campus activities, university budgets, athletics and other areas that directly affect our business operations .

Although most four year schools returned to a traditional on-campus environment, there is still uncertainty about the duration and extent of the impact of the COVID-19 pandemic, including on enrollments at community colleges and by international students, the continuation of remote and hybrid class offerings, and its effect on our ability to source products, including textbooks and general merchandise offerings.

We have three reportable segments:

Retail, Wholesale and DSS.

Additionally, unallocated shared-service costs, which include various corporate level expenses and other governance functions, continue to be presented as “Corporate Services”.

We identify our segments in accordance with the way our business is managed (focusing on the financial information

distributed) and the manner in which our chief operating decision maker allocates resources and assesses financial performance.

During the fourth quarter of Fiscal 2023, assets related to our DSS Segment met the criteria for classification as Assets Held for Sale and Discontinued Operations and is no longer a reportable segment.

We completed the sale of the previous DSS Segment during the first quarter of Fiscal 2024.

For additional information, see Note 2.

Summary of Significant Accounting Policies.

We have two reportable segments:

Retail and Wholesale.

Additionally, unallocated shared-service costs, which include various corporate level expenses and other governance functions, are not allocated to any specific reporting segment and continue to be presented as “Corporate Services”.

We identify our segments in accordance with the way our business is managed (focusing on the financial information distributed) and the manner in which our chief operating decision maker allocates resources and assesses financial performance.

The following summarizes the three segments.

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The majority of the physical campus bookstores have school-branded e-commerce websites which we operate independently or along with our merchant partners, and which offer students access to affordable course materials and affinity products, including emblematic apparel and gifts.

The Retail Segment also offers inclusive and equitable access programs, in which course materials are offered at a reduced price through a fee charged by the institution or included in tuition, and delivered to students on or before the first day of class.

The Retail Segment offers our BNC First Day ® equitable and inclusive access programs, consisting of First Day Complete and First Day , which provide faculty required course materials on or before the first day of class at a discounted rate, as compared to the total retail price for the same course materials if purchased separately.

The BNC First Day discounted price is offered as a course fee or included in tuition.

Additionally, the Retail Segment offers a suite of digital content and services to colleges and universities, including a variety of open educational resource-based courseware.

During the 13 weeks ended July 29, 2023, we opened 20 stores and closed 97 stores in the Retail Segment, with estimated net annual sales of $52 million as we pruned some under-performing, less profitable stores, satellite stores, and certain other contracts were awarded to competitors.

We plan to move many institutions to First Day Complete in Fiscal 2024 and the majority of our stores by Fiscal 2025, with continued relative adoption of this model thereafter.

Wholesale Segment

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Additionally, the Wholesale Segment sells hardware and a software suite of applications that provides inventory management and point-of-sale solutions to approximately 330 college bookstores.

The Digital Student Solutions (“DSS”) Segment includes products and services to assist students to study more effectively and improve academic performance.

The DSS Segment is comprised of the operations of Student Brands, LLC, a leading direct-to-student subscription-based writing services business, and bartleby ® , an institutional and direct-to-student subscription-based offering providing textbook solutions, expert questions and answers, writing and tutoring.

Corporate Services represents unallocated shared-service costs which include corporate level expenses and other governance functions, including executive functions, such as accounting, legal, treasury, information technology, and human resources.

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Our fiscal year is comprised of 52 or 53 weeks, ending on the Saturday closest to the last day of April.

For our retail operations, sales are generally highest in the second and third fiscal quarters, when students generally purchase and rent textbooks and other course materials, and lowest in the first and fourth fiscal quarters.

Sales attributable to our wholesale business are generally highest in our first, second and third quarter, as it sells textbooks and other course materials for retail distribution.

For our DSS segment, or direct-to-student business, sales and operating profit are realized relatively consistently throughout the year.

Our retail business is highly seasonal, with the major portion of sales and operating profit realized during the second and third fiscal quarters, when college students generally purchase and rent textbooks for the upcoming semesters.

Retail product revenue is recognized when the customer takes physical possession of our products, which occurs either at the point of sale for products purchased at physical locations or upon receipt of our products by our customers for products ordered through our websites and virtual bookstores.

Revenue from the sale of digital textbooks, which contains a single performance obligation, is recognized at the point of sale as product revenue in our condensed consolidated financial statements.

Revenue from the rental of physical textbooks is deferred and recognized over the rental period based on the passage of time commencing at the point of sale, when control of the product transfers to the customer and is recognized as rental income in our condensed consolidated financial statements.

Depending on the product mix offered under the BNC First

Day offerings, revenue recognized is consistent with our policies for product, digital and rental sales, net of an anticipated opt-out or return provision.

Given the growth of BNC First Day programs, the timing of cash collection from our school partners may shift to periods subsequent to when the revenue is recognized.

When a school adopts our BNC First Day equitable and inclusive access offerings, cash collection from the school generally occurs after the institution's drop/add dates, which is later in the working capital cycle, particularly in our third quarter given the timing of the Spring Term and our quarterly reporting period, as compared to direct-to-student point-of-sale transactions where cash is generally collected during the point-of-sale transaction or within a few days from the credit card processor.

As a higher percentage of our sales shift to BNC First Day equitable and inclusive access offerings, we are focused on efforts to better align the timing of our cash outflows to course material vendors and schools with cash inflows collected from schools, including modifying payment terms in existing and future school contracts.

Sales attributable to our wholesale business are generally highest in our first, second and third quarters, as it sells textbooks and other course materials for retail distribution.

Trends, Competition and Other Business Conditions Affecting Our Business

The market for educational materials is undergoing unprecedented change.

The market for educational materials continues to undergo significant change.

As tuition and other costs rise, colleges and universities face increasing pressure to attract and retain students and provide them with innovative, affordable educational content and tools that support their educational development.

Current trends, competition and other factors affecting our business include:

• Overall Economic Environment, Capital Markets, College Enrollment and Consumer Spending Patterns.

Our business is affected by the impact of the COVID-19 pandemic, the overall economic environment, capital markets, funding levels at colleges and universities, by changes in enrollments at colleges and universities, and spending on course materials and general merchandise.

• Impact of the COVID-19 Pandemic :

The COVID-19 pandemic has materially and adversely impacted certain segments of the U.S.

economy, with legislative and regulatory responses including unprecedented monetary and fiscal policy actions across all sectors.

Many colleges and K-12 schools had been required to cease in-person classes in an attempt to limit the spread of the COVID-19 virus and ensure the safety of their students.

Although most academic institutions have since reopened, some are providing alternatives to traditional in-person instruction, including online and hybrid learning options and significantly reduced classroom sizes.

While many athletic conferences resumed their sport

activities, other events, such as parent and alumni weekends and prospective student campus tour activities, some may still be curtailed or offered virtually.

Additionally, our business, like many others has been affected by the challenging labor market and the ability to recruit employees.

The impact of COVID-19 store closings during Fiscal 2021 to Fiscal 2022 resulted in the loss of cash flow and increased borrowings that we would not otherwise have expected to incur.

• Overall Capital Markets, Economic Environment, College Enrollment and Consumer Spending Patterns.

Our business is affected by capital markets, the overall economic environment, funding levels at colleges and universities, by changes in enrollments at colleges and universities, and spending on course materials and general merchandise.

• Capital Market Trends :

We may require additional capital in the future to sustain or grow our business, including implementation of our strategic initiatives.

The future availability of financing will depend on a variety of factors, such as economic and market conditions, and the availability of credit.

These factors have and could continue to materially adversely affect our costs of borrowing, and our financial position and results of operations would be adversely impacted.

Volatility in global financial markets may also limit our ability to access the capital markets at a time when we would like, or need, to raise capital, which could have an impact on our ability to react to changing economic and business conditions.

• Economic Environment:

Retail general merchandise sales are subject to short-term fluctuations driven by the broader retail environment and other economic factors, such as interest rate fluctuations and inflationary considerations.

The broader macro-economic global supply chain issues have impacted our ability to source textbooks, school supplies and general merchandise sold in our campus bookstores, including technology-related products and emblematic clothing.

Broader macro-economic global supply chain issues could impact our ability to source textbooks, school supplies and general merchandise sold in our campus bookstores, including technology-related products and emblematic clothing.

Union and labor market issues may also impact our ability to provide services and products to our customers.

A significant reduction in U.S.

economic activity could lead to decreased consumer spending.

• Capital Market Trends :

We may require additional capital in the future to sustain or grow our business.

The future availability of financing will depend on a variety of factors, such as economic and market conditions, and the availability of credit.

These factors could materially adversely affect our costs of borrowing, and our financial position and results of operations would be adversely impacted.

• Enrollment Trends:

The growth of our business depends on our ability to attract new customers and to increase the level of engagement by our current student customers.

The growth of our business depends on our ability to attract new customers and to increase the level of engagement by our current customers.

We continue to see downward enrollment trends.

Enrollment trends, specifically at community colleges, generally correlate with changes in the economy and unemployment factors, e.g., low unemployment tends to lead to low enrollment and higher unemployment rates tend to lead to higher enrollment trends, as students generally enroll to obtain skills that are in demand in the workforce.

Enrollment trends have been negatively impacted overall by COVID-19 concerns at physical campuses.

Additionally, enrollment trends are impacted by the dip in the United States birth rate resulting in fewer students at the traditional 18-24 year-old college age.

Online degree program enrollments continue to grow, even in the face of declining overall higher education enrollment.

• Increased Use of Online and Digital Platforms as Companions or Alternatives to Printed Course Materials.

• Increased Use of Open Educational Resources ("OER"), Online and Digital Platforms as Companions or Alternatives to Traditional Course Materials, Including Artificial Intelligence ("AI") Technologies.

Students and faculty can now choose from a wider variety of educational content and tools than ever before, delivered across both print and digital platforms.

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We are experiencing growing competition from alternative media and alternative sources of textbooks and other course materials.

In addition to the official physical or virtual campus bookstore, course materials are also sold through off-campus bookstores, e-commerce outlets, digital platform companies, publishers, including Cengage, Pearson and McGraw Hill, bypassing the bookstore distribution channel by selling or renting directly to students and educational institutions, and student-to-student transactions over the Internet.

• Supply Chain and Inventory.

In addition to the official physical or virtual campus bookstore, course materials are also sold through off-campus bookstores, e-commerce outlets, digital platform companies, publishers, including Cengage, Pearson and McGraw Hill, bypassing the bookstore distribution channel by selling or renting directly to students and educational institutions, including student-to-student transactions over the Internet, and multi-title subscription access.

• Suppliers, Supply Chain and Inventory.

The products that we sell originate from a wide variety of domestic and international vendors.

During Fiscal 2023, our four largest retail suppliers, excluding our wholesale business which fulfills orders for all our physical and virtual bookstores, accounted for approximately 28% of our merchandise purchased, with the largest supplier accounting for approximately 8% of our merchandise purchased.

Since the demand for used textbooks has historically been greater than the available supply, our financial results are highly dependent upon Wholesale’s ability to build its textbook inventory from suppliers in advance of the selling season.

Recently, the impact of fewer students on campus due to the COVID-19 pandemic has significantly impacted our on-campus buyback programs which supplies Wholesale’s used textbook inventory for future selling periods.

In Fiscal 2021 and Fiscal 2022, during the COVID-19 pandemic, the impact of fewer students on campus, and the resulting increase in transition to digital materials, has significantly impacted our on-campus buyback programs which supplies Wholesale’s used textbook inventory for future selling periods.

Some textbook publishers have begun to supply textbooks pursuant to consignment or rental programs which could impact used textbook supplies in the future.

Additionally, Wholesale is a national distributor for rental textbooks offered through McGraw-Hill Education's and Pearson Education’s consignment rental program, both of which are relatively nascent.

Additionally, Wholesale is a national distributor for rental textbooks offered through McGraw-Hill Education's and Pearson Education’s consignment rental program.

We do not have long-term arrangements with most of our suppliers to guarantee availability of merchandise, content or services, particular payment terms or the extension of credit limits.

If our current suppliers were to stop selling merchandise, content or services to us on acceptable terms, including as a result of one or more supplier bankruptcies due to poor economic conditions or refusal by such suppliers to ship products to us due to delayed or extended payment windows as a result of our own liquidity constraints, we may be unable to procure the same merchandise, content or services from other suppliers in a timely and efficient manner and on acceptable terms, or at all.

Additionally, delayed or incomplete publisher shipments of physical textbook orders, or delays in receiving digital courseware access codes, could have an adverse impact on sales, including our First Day Complete equitable access program, which relies upon timely receipt of inventory in advance of class start dates each academic term.

The broader macro-economic global supply chain issues may also impact our ability to source school supplies and general merchandise sold in our campus bookstores, including technology-related products and emblematic clothing.

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• First Day Complete and First Day Models.

Offering courseware sales through our inclusive and equitable access First Day Complete and First Day models is a key, and increasingly important, strategic initiative of ours to meet the market demands of substantially reduced pricing to students.

Our First Day Complete and First Day programs contribute to improved student outcomes, while increasing our market share, revenue and relative gross profits of courseware sales given the higher volumes of units sold in such models as compared to historical sales models that rely on individual student marketing and sales.

We expect these programs to allow us to ultimately reverse historical long-term trends in courseware revenue declines, which has been observed at those schools where such programs have been adopted.

Offering course materials sales through our equitable and inclusive access First Day Complete and First Day models is a key, and increasingly important, strategic initiative of ours to meet the market demands of substantially reduced pricing to students.

Our First Day Complete and First Day programs contribute to improved student outcomes, while increasing our market share, revenue and relative gross profits of course materials sales given the higher volumes of units sold in such models as compared to historical sales models that rely on individual student marketing and sales.

These programs have allowed us to reverse historical long-term trends in course materials revenue declines, which have been observed at those schools where such programs have been adopted.

We are moving quickly and decisively to accelerate our First Day Complete strategy.

While we plan to move many institutions to First Day Complete for the Fall of 2023, and the majority of our schools by Fall 2024, we cannot guarantee that we will be able to achieve these plans within these timeframes or at all.

While we plan to move many institutions to First Day Complete in Fiscal 2024, and the majority of our schools by Fiscal 2025, we cannot guarantee that we will be able to achieve these plans within these timeframes or at all.

• A Large Number of Traditional Campus Bookstores Have Yet to be Outsourced.

• Outsourcing Trends.

We continue to see the trend towards outsourcing in the campus bookstore market and also continue to see a variety of business models being pursued for the provision of course materials (such as inclusive and equitable access programs and publisher subscription models) and general merchandise.

We continue to see the trend towards outsourcing in the campus bookstore market and also continue to see a variety of business models being pursued for the provision of course materials (such as equitable and inclusive access programs and publisher subscription models) and general merchandise.

• New and Existing Bookstore Contracts .

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For additional discussion of our trends and other factors affecting our business, see Part I - Item 1.

Business in our Annual Report on Form 10-K for the year ended April 30, 2022.

Business in our Annual Report on Form 10-K for the fiscal year ended April 29, 2023.

Elements of Results of Operations

Our condensed consolidated financial statements reflect our consolidated financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States (“GAAP”).

The results of operations reflected in our consolidated financial statements are presented on a consolidated basis.

The results of operations reflected in our condensed consolidated financial statements are presented on a consolidated basis.

All material intercompany accounts and transactions have been eliminated in consolidation.

Our sales are primarily derived from the sale of course materials, which include new, used and digital textbooks, and at college and university bookstores which we operate, we sell high margin general merchandise, including emblematic apparel and gifts, trade books, computer products, school and dorm supplies, convenience and café items and graduation products.

During the fourth quarter of Fiscal 2023, assets related to our DSS Segment met the criteria for classification as Assets Held for Sale and Discontinued Operations.

Certain assets and liabilities associated with the DSS Segment are presented in our condensed consolidated balance sheets as current "Assets Held for Sale" and current "Liabilities Held for Sale".

The results of operations related to the DSS Segment are included in the condensed consolidated statements of operations as "Loss from discontinued operations, net of tax." The cash flows of the DSS Segment are also presented separately in our condensed consolidated statements of cash flows.

Our sales are primarily derived from the sale of course materials, which include new, used, rental and digital textbooks.

Additionally, at college and university bookstores which we operate, we sell general merchandise, including emblematic apparel and gifts, trade books, computer products, school and dorm supplies, convenience and café items and graduation products.

Our rental income is primarily derived from the rental of physical textbooks.

We also derive revenue from other sources, such as sales of inventory management, hardware and point-of-sale software, direct-to-student subscription-based services, and other services.

We also derive revenue from other sources, such as sales of inventory management, hardware and point-of-sale software, and other services.

Our cost of sales primarily includes costs such as merchandise costs, textbook rental amortization, content development cost amortization, warehouse costs related to inventory management and order fulfillment, insurance, certain payroll costs, and management service agreement costs, including rent expense, related to our college and university contracts and other facility related expenses.

Our selling and administrative expenses consist primarily of store payroll and store operating expenses.

Selling and administrative expenses also include long-term incentive plan compensation expense and general office expenses, such as merchandising, procurement, field support, finance and accounting, and operating costs related to our direct-to-student subscription-based services business.

Shared-service costs such as human resources, legal, treasury, information technology, and various other corporate level expenses and other governance functions, are not allocated to any specific reporting segment and are recorded in Corporate Services as discussed in the Overview - Segments discussion above.

Results of Operations - Summary

13 weeks ended 39 weeks ended

Dollars in thousands January 28,

2023 January 29,

2022 January 28,

2023 January 29,

Product sales and other (a)

Results of Operations - Summary - Continuing Operations (a)

13 weeks ended (a)

Dollars in thousands July 29,

2023 July 30,

Product sales and other (b)

$ 252,650 $ 243,762

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Total sales $ 264,161 $ 254,674

Net loss $ (25,049) $ (36,801) $ (55,612) $ (57,901)

Adjusted Earnings (non-GAAP) (b)

Net loss from continuing operations $ (49,971) $ (50,322)

Adjusted Earnings (non-GAAP) - Continuing Operations (c)

$ (45,338) $ (49,921)

Adjusted EBITDA by Segment (non-GAAP) (b)

Adjusted EBITDA by Segment (non-GAAP) - Continuing Operations (c)

Retail $ (18,882) $ (24,985)

Wholesale 2,406 2,768

DSS 1,253 1,476 2,322 3,975

Corporate Services (4,918) (7,214)

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Total Adjusted EBITDA (non-GAAP) $ (26,842) $ (34,310)

(a) Effective in April 2021, as contemplated by the F/L Partnership's merchandising agreement and e-commerce agreement, we began to transition the fulfillment of logo general merchandise sales to Lids and Fanatics.

The transition to Lids for campus stores was effective in April 2021, and the e-commerce websites transitioned to Fanatics throughout Fiscal 2022.

As the logo general merchandise sales are fulfilled by Lids and Fanatics, we recognize commission revenue earned for these sales on a net basis in our consolidated financial statements, as compared to the recognition of logo general merchandise sales on a gross basis in the periods prior to the transition.

(a) During the fourth quarter of Fiscal 2023, assets related to our Digital Student Solutions ("DSS") Segment met the criteria for classification as Assets Held for Sale and Discontinued Operations.

Net Loss from Continuing Operations excludes the results of operations related to the DSS Segment for all periods reported above.

(b) Logo general merchandise sales for the Retail Segment are recognized on a net basis as commission revenue in the condensed consolidated financial statements.

For Retail Gross Comparable Store Sales details, see below.

(b) Adjusted Earnings, Adjusted EBITDA, and Adjusted EBITDA by Segment are non-GAAP financial measures.

See Use of Non-GAAP Measures discussion below.

The following table sets forth, for the periods indicated, the percentage relationship that certain items bear to total sales:

13 weeks ended 39 weeks ended

2023 January 29,

2022 January 28,

2023 January 29,

13 weeks ended

2023 July 30,

Product sales and other 95.6 % 95.7 %

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Product and other cost of sales (a)

79.4 78.8 78.2 78.2

Rental cost of sales (a)

52.4 72.3 54.3 60.5

Total cost of sales 80.8 78.0

2 unchanged sentences

Depreciation and amortization expense 3.9 4.3

Impairment loss (non-cash) 1.3 1.6 0.5 0.5

Restructuring and other charges 1.8 0.1

Operating loss (4.0) % (8.2) % (3.1) % (3.9) %

Operating loss from continuing operations (15.8) % (17.9) %

(a) Represents the percentage these costs bear to the related sales, instead of total sales.

Results of Operations - 13 and 39 weeks ended January 28, 2023 compared with the 13 and 39 weeks ended January 29, 2022

13 weeks ended January 28, 2023

Dollars in thousands Retail Wholesale DSS Corporate Services Eliminations Total

Product sales and other $ 376,950 $ 38,958 $ 9,010 $ — $ (22,163) $ 402,755

Rental income 44,309 — — — — 44,309

Total sales 421,259 38,958 9,010 — (22,163) 447,064

Cost of sales (exclusive of depreciation and amortization expense):

Product and other cost of sales 309,123 32,290 1,811 — (23,580) 319,644

Rental cost of sales 23,210 — — — — 23,210

Total cost of sales 332,333 32,290 1,811 — (23,580) 342,854

Gross profit 88,926 6,668 7,199 — 1,417 104,210

Selling and administrative expenses 82,753 3,563 7,632 5,572 (47) 99,473

Depreciation and amortization expense 8,749 1,357 506 6 — 10,618

Impairment loss (non-cash) 6,008 — — — — 6,008

Restructuring and other charges 1,452 931 1,848 1,744 — 5,975

Operating (loss) income $ (10,036) $ 817 $ (2,787) $ (7,322) $ 1,464 $ (17,864)

13 weeks ended January 29, 2022

Dollars in thousands Retail Wholesale DSS Corporate Services Eliminations Total

Product sales and other $ 349,655 $ 37,039 $ 9,430 $ — $ (18,411) $ 377,713

Rental income 25,085 — — — — 25,085

Results of Operations - Discontinued Operations

During the fourth quarter of fiscal 2023, assets related to our Digital Student Solutions ("DSS") Segment met the criteria for classification as Assets Held for Sale and Discontinued Operations and is no longer a reportable segment.

Certain assets and liabilities associated with the DSS Segment are presented in our condensed consolidated balance sheets as "Assets Held for Sale" and "Liabilities Held for Sale".

On May 31, 2023, we completed the sale of these assets related to our DSS Segment for cash proceeds of $20 million, net of certain transaction fees, severance costs, escrow, and other considerations.

During the 13 weeks ended July 29, 2023, we recorded a Gain on Sale of Business of $3.1 million in Net Loss from Discontinued Operations related to the sale.

Net cash proceeds from the sale were used for debt repayment and to provide additional funds for working capital needs under our Credit Facility.

13 weeks ended

Dollars in thousands July 29, 2023

July 30, 2022

Total sales 2,784 9,184

Cost of sales (exclusive of depreciation and amortization expense):

Product and other cost of sales 287,435 28,935 1,498 — (20,175) 297,693

Rental cost of sales 18,144 — — — — 18,144

Total cost of sales 305,579 28,935 1,498 — (20,175) 315,837

Gross profit 69,161 8,104 7,932 — 1,764 86,961

Cost of sales (a)

Gross profit (a)

Selling and administrative expenses 2,281 8,145

Depreciation and amortization expense 8,939 1,396 1,826 18 — 12,179

Impairment loss (non-cash) 6,411 — — — — 6,411

Restructuring and other charges 30 — — 16 — 46

Operating (loss) income $ (30,845) $ 2,767 $ (1,669) $ (5,188) $ 1,800 $ (33,135)

39 weeks ended January 28, 2023

Dollars in thousands Retail Wholesale DSS Corporate Services Eliminations Total

Depreciation and amortization — 1,637

Gain on sale of business (3,068) —

Impairment loss (non-cash) (b)

Restructuring costs (c)

Transaction costs (5) —

Operating loss (397) (2,299)

Income tax expense 20 86

Loss from discontinued operations, net of tax $ (417) $ (2,385)

(a) Cost of sales and Gross margin for the DSS Segment includes amortization expense (non-cash) related to content development costs of $0 and $1.6 million for the 13 weeks ended July 29, 2023 and July 30, 2022, respectively.

(b) During the 13 weeks ended July 29, 2023, we recognized an impairment loss (non-cash) of $0.6 million (both pre-tax and after-tax), comprised of $0.1 million and $0.5 million of property and equipment and operating lease right-of-use assets, respectively, on the condensed consolidated statement of operations as part of discontinued operations.

(c) During the 13 weeks ended July 29, 2023, we recognized restructuring and other charges of $3.3 million comprised of severance and other employee termination costs.

Results of Operations - Continuing Operations - 13 weeks ended July 29, 2023 compared with the 13 weeks ended July 30, 2022

13 weeks ended July 29, 2023

Dollars in thousands Retail Wholesale Corporate Services Eliminations Total

Product sales and other $ 233,949 $ 38,791 $ — $ (20,090) $ 252,650

8 unchanged sentences

Depreciation and amortization expense 8,966 1,277 10 — 10,253

Impairment loss (non-cash) 6,008 — — — — 6,008

Restructuring and other charges 526 526 3,581 — 4,633

Operating (loss) income $ (28,374) $ 603 $ (8,509) $ (5,448) $ (41,728)

39 weeks ended January 29, 2022

Dollars in thousands Retail Wholesale DSS Corporate Services Eliminations Total

13 weeks ended July 30, 2022

Dollars in thousands Retail Wholesale Corporate Services Eliminations Total

Product sales and other $ 225,595 $ 37,083 $ — $ (18,916) $ 243,762

8 unchanged sentences

Depreciation and amortization expense 9,529 1,349 18 — 10,896

Impairment loss (non-cash) 6,411 — — — — 6,411

Restructuring and other charges — — 375 — 375

Operating (loss) income $ (34,540) $ 1,419 $ (7,607) $ (4,879) $ (45,607)

The following table summarizes our sales for the 13 and 39 weeks ended January 28, 2023 and January 29, 2022:

13 weeks ended 39 weeks ended

Dollars in thousands January 28, 2023 January 29, 2022 Var $ Var % January 28, 2023 January 29, 2022 Var $ Var %

The following table summarizes our sales for the 13 weeks ended July 29, 2023 and July 30, 2022:

13 weeks ended

Dollars in thousands July 29, 2023 July 30, 2022 Var $ Var %

Product sales and other $ 252,650 $ 243,762 $ 8,888 3.6%

1 unchanged sentence

Total Sales $ 264,161 $ 254,674 $ 9,487 3.7%

The sales increase during the 13 and 39 weeks ended January 28, 2023 is primarily related to higher course material sales, primarily at our First Day programs and higher general merchandise sales as many schools approach a more traditional on campus learning experience.

The components of the variances for the 13 and 39 week periods are reflected in the table below.

Sales variances 13 weeks ended 39 weeks ended

Dollars in millions January 28, 2023 January 28, 2023

The sales increase during the 13 weeks ended July 29, 2023 is primarily related to higher course material sales, primarily at our First Day programs.

During the first quarter ended July 29, 2023, BNC First Day total revenue increased by $16.7 million, or 37%, to $61.7 million compared to $45.1 million during the prior year period.

The components of the variances for the 13 week periods are reflected in the table below.

Sales variances 13 weeks ended

Dollars in millions July 29, 2023

Retail Sales (a)

New stores $ 4.7

4 unchanged sentences

Retail sales subtotal:

$ 46.5 $ 62.2

Wholesale Sales $ 1.7

DSS Sales $ (0.4) $ 0.7

Eliminations (d)

$ (3.7) $ 0.6

Total sales variance:

$ 44.3 $ 57.5

(a) In December 2020, we entered into merchandising partnership with Fanatics Retail Group Fulfillment, LLC, Inc.

(“Fanatics”) and Fanatics Lids College, Inc.

D/B/A "Lids" (“Lids”) (collectively referred to herein as the “F/L Partnership”).

Effective in April 2021, as contemplated by the F/L Partnership's merchandising agreement and e-commerce agreement, we began to transition the fulfillment of logo general merchandise sales to Lids and Fanatics.

The transition to Lids for campus stores was effective in April 2021, and the e-commerce websites transitioned to Fanatics throughout Fiscal 2022.

(a) Logo general merchandise sales for the Retail Segment are recognized on a net basis as commission revenue in the condensed consolidated financial statements.

For Retail Gross Comparable Store Sales details, see below.

4 unchanged sentences

The following is a store count summary for physical stores and virtual stores.

Many of the store closings relate to closing less profitable stores, including satellite store locations.

13 weeks ended 39 weeks ended

January 28, 2023 January 29, 2022 January 28, 2023 January 29, 2022

13 weeks ended

July 29, 2023 July 30, 2022

Number of Stores:

Physical Virtual Total Physical Virtual Total Physical Virtual Total Physical Virtual Total

Physical Virtual Total Physical Virtual Total

Beginning of period 774 592 1,366 805 622 1,427

2 unchanged sentences

End of period 726 563 1,289 793 613 1,406

Generally, sales are impacted by revenue from net new/closed stores, increased campus traffic, and an increase in the number of on campus activities and events, such as graduations, alumni events and prospective student campus tours, as schools approach a more traditional campus experience.

We continued to experience higher sales related to our First Day programs and higher general merchandise sales, especially for graduation products, logo products, and cafe and convenience products, as on campus traffic continues to grow compared to the prior year.

We plan to move many institutions to First Day Complete in Fiscal 2024 and the majority of our stores by Fiscal 2025, with continued relative adoption of this model thereafter.

Generally, sales are impacted by revenue from net new/closed stores, increased campus traffic, and an increase in the number of on campus activities and events, such as graduations, athletic events, alumni events and prospective student campus tours, as schools approach a more traditional campus experience.

We continued to experience higher sales related to our BNC First Day programs and higher general merchandise gross sales, especially for graduation products, logo products, and cafe and convenience products, as on campus traffic continues to grow compared to the prior year.

Sales were negatively impacted by lower enrollments, primarily at community colleges and by international students, and the continuation of remote and hybrid class offerings.

Retail sales increased by $46.5 million, or 12.4%, to $421.2 million during the 13 weeks ended January 28, 2023 from $374.7 million during the 13 weeks ended January 29, 2022.

Our third quarter 2022 results were negatively impacted by a Covid variant experienced on campuses across the country during the 2022 Spring Term which did not recur during the 2023 Spring Term.

In addition, our sales and margins were positively impacted in Q3 2023 compared to Q3 2022 as a result of improved availability of used inventory which was constrained in 2022.

• Product sales and other increased by $27.3 million, or 7.8%, to $377.0 million during the 13 weeks ended January 28, 2023 from $349.7 million during the 13 weeks ended January 29, 2022.

During the 13 weeks ended January 28, 2023,

total course material product sales increased by $23.8 million, or 9.1%, to $286.7 million;

total general merchandise product sales increased by $5.0 million, or 6.6%, to $81.8 million as students return to on campus activities, partially offset by a decrease in service and other revenue of $1.6 million, or 15.6%, to $8.4 million.

• Revenue from both of our First Day inclusive and equitable access programs increased by $45 million, or 59%, to $121 million during the 13 weeks ended January 28, 2023, as compared to $76 million during the 13 weeks ended January 29, 2022.

Specifically, First Day Complete total sales increased by $29 million, or 76%, to $67 million during the 13 weeks ended January 28, 2023, as compared to $38 million during the 13 weeks ended January 29, 2022.

• Total course material rental income increased by $19.2 million, or 76.6%, to $44.3 million during the 13 weeks ended January 28, 2023 from $25.1 million during the 13 weeks ended January 29, 2022 primarily due to increased rental textbook activity in our First Day Complete program and improved availability of used textbook inventory.

Retail sales increased by $62.2 million, or 5.2%, to $1,256.4 million during the 39 weeks ended January 28, 2023 from $1,194.2 million during the 39 weeks ended January 29, 2022.

• Product sales and other increased by $53.4 million, or 4.8%, to $1,159.8 million during the 39 weeks ended January 28, 2023 from $1,106.4 million during the 39 weeks ended January 29, 2022.

During the 39 weeks ended January 28, 2023, total course material product sales increased by $15.3 million, or 1.9%, to $834.2 million;

total general merchandise product sales increased by $44.9 million, or 18.1%, to $293.3 million as students return to on campus activities, partially offset by a decrease in service and other revenue of $6.8 million, or 32.3%, to $32.3 million primarily due to lower shipping and handling income resulting from increased in-store order fulfillment.

• Revenue from both of our First Day inclusive and equitable access programs increased by $110 million, or 55%, to $309 million during the 39 weeks ended January 28, 2023, as compared to $199 million during the 39 weeks ended January 29, 2022.

Specifically, First Day Complete total sales increased by $84 million, or 94%, to $174 million during the 39 weeks ended January 28, 2023, as compared to $90 million during the 39 weeks ended January 29, 2022.

• Total course material rental income increased by $8.8 million, or 10.0%, to $96.6 million during the 39 weeks ended January 28, 2023 from $87.8 million during the 39 weeks ended January 29, 2022 primarily due to increased rental textbook activity in our First Day Complete program and improved availability of used textbook inventory.

Retail sales increased by $9.0 million, or 3.8%, to $245.5 million during the 13 weeks ended July 29, 2023 from $236.5 million during the 13 weeks ended July 30, 2022.

• Product sales and other increased by $8.4 million, or 3.7%, to $233.9 million during the 13 weeks ended July 29, 2023 from $225.6 million during the 13 weeks ended July 30, 2022.

During the 13 weeks ended July 29, 2023, total course material product sales increased by $11.0 million, or 8.7%, to $138.5 million primarily due to the growth of our BNC First Day programs discussed below;

total general merchandise product net sales decreased by $0.1 million, or 0.2%, to

$88.7 million primarily due to lower commissions for logo general merchandise part of the F/L Partnership agreements, under which the commission rates adjusts as the relationship matured, offset by higher graduation product sales.

Effective August 1, 2023, the commission rates for logo general merchandise increases for an estimated one year period under the terms of the July 2023 Term Loan Credit Agreement amendment.

Retail Gross Comparable Store Sales for general merchandise increased by 5.3% as discussed below.

Service and other revenue decreased by $2.5 million, to $6.7 million primarily due to lower other income for non-return rental penalty fees.

• Revenue from both of our BNC First Day equitable and inclusive access programs increased by $16.7 million, or 37%, to $61.8 million during the 13 weeks ended July 29, 2023, as compared to $45.1 million during the 13 weeks ended July 30, 2022.

First Day sales increased by $7.7 million, or 27%, to $36.3 million during the 13 weeks ended July 29, 2023, as compared to $28.6 million during the 13 weeks ended July 30, 2022.

First Day Complete total sales increased by $9.0 million, or 55%, to $25.5 million during the 13 weeks ended July 29, 2023, as compared to $16.5 million during the 13 weeks ended July 30, 2022.

As of July 29, 2023, 157 campus stores are utilizing First Day Complete course materials delivery program for the 2023 Fall Term, representing approximately 800,000 in total undergraduate and post graduate student enrollment (as reported by National Center for Education Statistics), compared to 111 campus stores representing approximately 545,000 in total undergraduate student enrollment in the 2022 Fall Term.

• Total course material rental income increased by $0.6 million, or 5.5%, to $11.5 million during the 13 weeks ended July 29, 2023 from $10.9 million during the 13 weeks ended July 30, 2022 primarily due to increased rental textbook activity in our First Day Complete program and improved availability of used textbook inventory.

Retail Gross Comparable Store Sales

During the 13 and 39 weeks ended January 28, 2023, logo general merchandise sales are reflected in sales on a net basis in our condensed consolidated financial statements, as compared to the recognition of logo general merchandise sales on a gross basis for the majority of our e-commerce websites during the 39 weeks ended January 29, 2022.

To supplement the Total Sales table presented above, the Company uses Retail Gross Comparable Store Sales as a key performance indicator.

Retail Gross Comparable Store Sales includes sales from physical and virtual stores that have been open for an entire fiscal year period and does not include sales from permanently closed stores for all periods presented.

For Retail Gross Comparable Store Sales, sales for logo general merchandise fulfilled by Lids, Fanatics and digital agency sales are included on a gross basis for consistent year-over-year comparison.

The transition to Lids for campus stores was effective in April 2021, and the e-commerce websites transitioned to Fanatics throughout Fiscal 2022.

As the logo general merchandise sales are fulfilled by Lids and Fanatics, we recognize commission revenue earned for these sales on a net basis in our condensed consolidated financial statements, as compared to the recognition of logo general merchandise sales on a gross basis in the periods prior to the transition.

For Retail Gross Comparable Store Sales, sales for logo general merchandise fulfilled by Lids, Fanatics and digital agency sales are included on a gross basis in Retail Gross Comparable Store Sales compared to a net basis as commission revenue in our condensed consolidated financial statements.

We believe the current Retail Gross Comparable Store Sales calculation method reflects management’s view that such comparable store sales are an important measure of the growth in sales when evaluating how established stores have performed over time.

1 unchanged sentence

Retail Gross Comparable Store Sales are also referred to as "same-store" sales by others within the retail industry and the method of calculating comparable store sales varies across the retail industry.

As a result, our calculation of comparable

store sales is not necessarily comparable to similarly titled measures reported by other companies and is intended only as supplemental information and is not a substitute for net sales presented in accordance with GAAP.

During the 13 and 39 weeks ended January 28, 2023, Retail Gross Comparable Store general merchandise sales increased by 2.3% and 11.3%, respectively.

During the 13 and 39 weeks ended January 28, 2023, Retail Gross Comparable Store course material sales increased by 7.4% and 0.3%, respectively.

The increase in course material sales was primarily due to the growth of First Day inclusive and equitable access programs (as discussed above), partially offset by a shift to lower cost options and more affordable solutions, including digital offerings.

Retail Gross Comparable Store Sales variances by category for the 13 and 39 week periods are as follows:

13 weeks ended 39 weeks ended

Dollars in millions January 28, 2023 January 29, 2022 January 28, 2023 January 29, 2022

As a result, our calculation of comparable store sales is not necessarily comparable to similarly titled measures reported by other companies and is intended only as supplemental information and is not a substitute for net sales presented in accordance with GAAP.

The increase in course material sales was primarily due to the growth of BNC First Day equitable and inclusive access programs (as discussed above), partially offset by a shift to lower cost options and more affordable solutions, including digital offerings.

The increase in general merchandise sales was primarily due to higher sales related to graduation products and logo products, and cafe and convenience products.

Retail Gross Comparable Store Sales variances by category for the 13 week periods are as follows:

13 weeks ended

Dollars in millions July 29, 2023 July 30, 2022

Textbooks (Course Materials) $ 9.0 6.5 % $ 1.9 1.5 %

1 unchanged sentence

Total Retail Gross Comparable Store Sales $ 15.8 5.9 % $ 33.5 15.0 %

Wholesale sales increased by $1.9 million, or 5.2% to $38.9 million during the 13 weeks ended January 28, 2023 from $37.0 million during the 13 weeks ended January 29, 2022.

The increase is primarily due to increased customer demand compared to the prior year period, partially offset by higher returns and allowances.

Wholesale sales decreased by $6.0 million, or 5.8% to $97.2 million during the 39 weeks ended January 28, 2023 from $103.2 million during the 39 weeks ended January 29, 2022.

The decrease is primarily due to lower gross sales impacted by supply constraints resulting from the lack of textbook purchasing opportunities during the prior fiscal year, a decrease in customer demand resulting from a shift in buying patterns from physical textbooks to digital products, and lower demand from other third-party clients, and higher returns and allowances.

DSS total sales decreased by $0.4 million, or 4.5% to $9.0 million during the 13 weeks ended January 28, 2023 from $9.4 million during the 13 weeks ended January 29, 2022.

Sales decreased in both Bartleby and Student Brands subscription sales.

DSS total sales increased by $0.7 million, or 2.5% to $26.7 million during the 39 weeks ended January 28, 2023 from $26.0 million during the 39 weeks ended January 29, 2022.

Sales increased primarily due to an increase in Student Brands subscription sales.

Wholesale sales increased by $1.7 million, or 4.6% to $38.8 million during the 13 weeks ended July 29, 2023 from $37.1 million during the 13 weeks ended July 30, 2022.

The increase is primarily due to higher gross sales of $5.1 million compared to the prior year period, partially offset by higher returns and allowances of $3.4 million.

Cost of Sales and Gross Margin

Our cost of sales decreased as a percentage of sales to 76.7% during the 13 weeks ended January 28, 2023 compared to 78.4% during the 13 weeks ended January 29, 2022.

Our gross margin increased by $17.2 million, or 19.8%, to $104.2 million, or 23.3% of sales, during the 13 weeks ended January 28, 2023 from $87.0 million, or 21.6% of sales during the 13 weeks ended January 29, 2022.

Our cost of sales decreased as a percentage of sales to 76.5% during the 39 weeks ended January 28, 2023 compared to 77.0% during the 39 weeks ended January 29, 2022.

Our gross margin increased by $20.0 million, or 6.8%, to $312.5 million, or 23.5% of sales, during the 39 weeks ended January 28, 2023 from $292.5 million, or 23.0% of sales during the 39 weeks ended January 29, 2022.

During the 39 weeks ended January 29, 2022, we recognized a merchandise inventory loss of $0.4 million in cost of goods sold in the Retail Segment discussed below.

For additional information, see Item 1.

Financial Statements - Note 2.

Summary of Significant Accounting Policies - Merchandise Inventories.

The following table summarizes the Retail cost of sales for the 13 and 39 weeks ended January 28, 2023 and January 29, 2022:

13 weeks ended 39 weeks ended

Dollars in thousands January 28, 2023 % of

Related Sales January 29, 2022 % of

Related Sales January 28, 2023 % of

Related Sales January 29, 2022 % of

Our cost of sales increased as a percentage of sales to 80.8% during the 13 weeks ended July 29, 2023 compared to 78.0% during the 13 weeks ended July 30, 2022.

Our gross margin decreased by $5.4 million, or 9.6%, to $50.6 million, or 19.2% of sales, during the 13 weeks ended July 29, 2023 from $56.0 million, or 22.0% of sales during the 13 weeks ended July 30, 2022.

The following table summarizes the Retail cost of sales for the 13 weeks ended July 29, 2023 and July 30, 2022:

13 weeks ended

Dollars in thousands July 29, 2023 % of

Related Sales July 30, 2022 % of

Related Sales

5 unchanged sentences

$ 195,169 79.5% $ 182,514 77.2%

The following table summarizes the Retail gross margin for the 13 and 39 weeks ended January 28, 2023 and January 29, 2022:

13 weeks ended 39 weeks ended

Dollars in thousands January 28, 2023 % of

Related Sales January 29, 2022 % of

Related Sales January 28, 2023 % of

Related Sales January 29, 2022 % of

The following table summarizes the Retail gross margin for the 13 weeks ended July 29, 2023 and July 30, 2022:

13 weeks ended

Dollars in thousands July 29, 2023 % of

Related Sales July 30, 2022 % of

Related Sales

4 unchanged sentences

$ 50,291 20.5% $ 53,993 22.8%

For the 13 and 39 weeks ended January 28, 2023, the Retail Product and other gross margin as a percentage of sales increased as discussed below:

• For the 13 weeks ended January 28, 2023, Product and other gross margin increased (20 basis points), driven primarily by lower contract costs as a percentage of sales related to our college and university contracts (200 basis points) resulting from contract renewals and new store contracts, partially offset by lower margin rates (105 basis points) due to higher markdowns and an unfavorable sales mix (75 basis points) due to the increased shift to lower margin digital products.

• For the 39 weeks ended January 28, 2023, Product and other gross margin increased (60 basis points), driven primarily by a favorable sales mix (85 basis points) due to higher general merchandise sales and higher margin rates (10 basis points) due to lower markdowns, partially offset by higher contract costs as a percentage of sales related to our college and university contracts (40 basis points) resulting from contract renewals and new store contracts.

For the 13 and 39 weeks ended January 28, 2023, the Retail Rental gross margin as a percentage of sales increased driven primarily by higher rental margin rates primarily due to our First Day Complete program and favorable rental mix due to improved availability of used textbook inventory, partially offset by higher contract costs as a percentage of sales related to our college and university contracts resulting from contract renewals and new store contracts.

The cost of sales and gross margin for Wholesale were $32.3 million, or 82.9% of sales, and $6.7 million, or 17.1% of sales, respectively, during the 13 weeks ended January 28, 2023.

The cost of sales and gross margin for Wholesale was $28.9 million or 78.1% of sales and $8.1 million or 21.9% of sales, respectively, during the 13 weeks ended January 29, 2022.

The cost of sales and gross margin for Wholesale were $78.1 million, or 80.4% of sales, and $19.0 million, or 19.6% of sales, respectively, during the 39 weeks ended January 28, 2023.

The cost of sales and gross margin for Wholesale was $79.1 million or 76.6% of sales and $24.1 million or 23.4% of sales, respectively, during the 39 weeks ended January 29, 2022.

The gross margin rate decreased during both the 13 and 39 weeks ended January 28, 2023 primarily due to higher markdowns.

The gross margin for the DSS segment was $7.2 million, or 79.9% of sales, during the 13 weeks ended January 28, 2023 and $7.9 million, or 84.1% of sales, during the 13 weeks ended January 29, 2022.

The gross margin for the DSS segment was $21.4 million, or 80.2% of sales, during the 39 weeks ended January 28, 2023 and $21.9 million, or 84.1% of sales, during the 39 weeks ended January 29, 2022.

The high gross margins are driven primarily by high margin subscription service revenue earned.

For the 13 weeks ended July 29, 2023, the Retail Product and other gross margin as a percentage of sales decreased as discussed below:

• For the 13 weeks ended July 29, 2023, Product and other gross margin decreased (250 basis points), driven primarily by lower margin rates for course materials (200 basis points) due to higher markdowns, including markdowns related to closed stores, and lower margin rates due to the shift to digital course materials;

and lower commissions for logo general merchandise (290 basis points) as part of the F/L Partnership agreements, under which the commission rates adjust as the relationship matures.

Effective August 1, 2023, the commission rates for logo general merchandise increases for an estimated one year period under the terms of the July 2023 Term Loan Credit Agreement amendment.

These decreases were partially offset by lower contract costs as a percentage of sales related to our college and university contracts (210 basis points) resulting from contract renewals, and a favorable sales mix (30 basis points) due to increased sales primarily for graduation products.

• For the 13 weeks ended July 29, 2023, the Retail Rental gross margin as a percentage of sales increased driven primarily by favorable rental mix due to improved availability of used textbook inventory, partially offset by higher rental margin rates.

The cost of sales and gross margin for Wholesale were $33.0 million, or 85.1% of sales, and $5.8 million, or 14.9% of sales, respectively, during the 13 weeks ended July 29, 2023.

The cost of sales and gross margin for Wholesale was $30.2 million or 81.4% of sales and $6.9 million or 18.6% of sales, respectively, during the 13 weeks ended July 30, 2022.

The gross margin rate decreased during the 13 weeks ended July 29, 2023 primarily due to higher product costs and an increase in the returns and allowances, partially offset by lower markdowns.

Intercompany Eliminations

During the 13 weeks ended January 28, 2023 and January 29, 2022, our sales eliminations were $(22.2) million and $(18.4) million, respectively.

During the 39 weeks ended January 28, 2023 and January 29, 2022, our sales eliminations were $(52.2) million and $(52.8) million, respectively.

During the 13 weeks ended July 29, 2023 and July 30, 2022, our sales eliminations were $(20.1) million and $(18.9) million, respectively.

These sales eliminations represent the elimination of Wholesale sales and fulfillment service fees to Retail and the elimination of Retail commissions earned from Wholesale.

During the 13 weeks ended January 28, 2023 and January 29, 2022, the cost of sales eliminations were $(23.6) million and $(20.2) million, respectively.

During the 39 weeks ended January 28, 2023 and January 29, 2022, the cost of sales eliminations were $(51.9) million and $(53.2) million, respectively.

for virtual store sales, net of (ii) the elimination of intercompany profit for Wholesale inventory purchases by Retail that remain in ending inventory at the end of the current period.

During the 13 weeks ended January 28, 2023 and January 29, 2022, the gross margin eliminations were $1.4 million and $1.8 million, respectively.

During the 39 weeks ended January 28, 2023 and January 29, 2022, the gross margin eliminations were $(0.3) million and $0.4 million, respectively.

During the 13 weeks ended July 29, 2023 and July 30, 2022, the cost of sales eliminations were $(14.6) million and $(14.0) million, respectively.

These cost of sales eliminations represent (i) the recognition of intercompany profit for Retail inventory that was purchased from Wholesale in a prior period that was subsequently sold to external customers during the current period and the elimination of Wholesale service fees charged for fulfillment of inventory for virtual store sales, net of (ii) the elimination of intercompany profit for Wholesale inventory purchases by Retail that remain in ending inventory at the end of the current period.

During the 13 weeks ended July 29, 2023 and July 30, 2022, the gross margin eliminations were $(5.5) million and $(4.9) million, respectively.

The gross margin eliminations reflect the net impact of the sales eliminations and cost of sales eliminations during the above mentioned reporting periods.

Selling and Administrative Expenses

13 weeks ended 39 weeks ended

Dollars in thousands January 28, 2023 % of

Sales January 29, 2022 % of

Sales January 28, 2023 % of

Sales January 29, 2022 % of

13 weeks ended

Dollars in thousands July 29, 2023 % of

Sales July 30, 2022 % of

Total Selling and Administrative Expenses

$ 77,476 29.3% $ 90,341 35.5%

During the 13 weeks ended January 28, 2023, selling and administrative expenses decreased by $2.0 million, or 2.0%, to $99.5 million from $101.5 million during the 13 weeks ended January 29, 2022.

During the 39 weeks ended January 28, 2023, selling and administrative expenses increased by $9.4 million, or 3.2%, to $305.0 million from $295.6 million during the 39 weeks ended January 29, 2022.

The variances by segment are discussed by segment below.

During the 13 weeks ended January 28, 2023, Retail selling and administrative expenses decreased by $1.9 million, or 2.2%, to $82.7 million from $84.6 million during the 13 weeks ended January 29, 2022.

This decrease was primarily due to a $3.0 million decrease in comparable store payroll and operating costs primarily due to cost initiatives implemented during the quarter, and a $1.3 million decrease in incentive plan compensation expense, including compensation expense related to phantom share awards, partially offset by a $1.5 million increase in net new/closed store payroll and operating costs, and a $1.0 million increase in corporate payroll, infrastructure and product development costs.

During the 39 weeks ended January 28, 2023, Retail selling and administrative expenses increased by $9.3 million, or 3.9%, to $251.8 million from $242.5 million during the 39 weeks ended January 29, 2022.

This increase was primarily due to an increase in store payroll and operating costs at new/closed stores and comparable stores of $6.8 million and $1.3 million, respectively, and an $8.7 million increase in corporate payroll, infrastructure and product development costs, partially offset by a $7.6 million decrease in incentive plan compensation expense, including compensation expense related to phantom share awards.

The payroll increase is primarily related to increased staffing at stores that had temporarily or partially closed due to limited on campus activities related to the COVID-19 pandemic in the prior year.

The increase is also due to greater on campus activity and related sales during the 39 weeks ended January 28, 2023 and costs to support the growth in First Day programs.

Wholesale selling and administrative expenses decreased by $0.4 million, or 9.6%, to $3.5 million from $3.9 million during the 13 weeks ended January 29, 2022.

The decrease was primarily driven by lower compensation expense of $0.3 million, including incentive plan compensation expense, and lower operating costs of $0.1 million.

Wholesale selling and administrative expenses decreased by $0.7 million, or 6.2%, to $11.6 million from $12.3 million during the 39 weeks ended January 29, 2022.

The decrease was primarily driven by lower compensation expense, including incentive plan compensation expense of $0.6 million.

During the 13 weeks ended January 28, 2023, DSS selling and administrative expenses decreased by $0.2 million, or 1.8%, to $7.6 million from $7.8 million during the 13 weeks ended January 29, 2022.

The decrease in costs was primarily driven by a decrease of $0.4 million in incentive plan compensation expense, partially offset by higher compensation expense of $0.1 million and an increase of $0.1 million in operating costs invested in the business associated with product development, sales and infrastructure costs aimed at increasing revenue.

During the 39 weeks ended January 28, 2023, DSS selling and administrative expenses increased by $2.4 million, or 11.1%, to $23.9 million from $21.5 million during the 39 weeks ended January 29, 2022.

The increase in costs was primarily driven by an increase of $1.4 million in compensation expense and an increase of $1.6 million in operating costs invested in the business associated with product development, sales and infrastructure costs aimed at increasing revenue, partially offset by lower incentive plan compensation expense of $0.6 million.

DSS has begun to adjust its cost structure, particularly within its Bartleby organization, to focus on enhanced profitability and sustainable growth.

During the 13 weeks ended July 29, 2023, selling and administrative expenses decreased by $12.9 million, or 14.2%, to $77.5 million from $90.3 million during the 13 weeks ended July 30, 2022.

The variances by segment are discussed below.

During the 13 weeks ended July 29, 2023, Retail selling and administrative expenses decreased by $9.8 million, or 12.4%, to $69.2 million from $79.0 million during the 13 weeks ended July 30, 2022.

This decrease was primarily due to cost savings initiatives comprised of a $6.0 million decrease in comparable store payroll expense, new/closed store payroll expense and related operating costs, a $1.6 million decrease in corporate payroll expense, infrastructure and product development costs, and a $2.2 million decrease in incentive plan compensation expense.

Wholesale selling and administrative expenses decreased by $0.7 million, or 18.0%, to $3.4 million from $4.1 million during the 13 weeks ended July 30, 2022.

The decrease was primarily due to cost savings initiatives comprised of lower payroll expense of $0.6 million and lower incentive plan compensation expense of $0.1 million.

Corporate Services

During the 13 weeks ended January 28, 2023, Corporate Services' selling and administrative expenses increased by $0.4 million, or 8.1%, to $5.6 million from $5.2 million during the 13 weeks ended January 29, 2022.

The increase in costs was primarily due to higher compensation expense of $0.6 million and higher professional service costs of $0.3 million, partially offset by lower incentive plan compensation costs of $0.5 million.

During the 39 weeks ended January 28, 2023, Corporate Services' selling and administrative expenses decreased by $1.5 million, or 8.0%, to $17.9 million from $19.4 million during the 39 weeks ended January 29, 2022.

The decrease in costs was primarily due to lower incentive plan compensation costs of $2.7 million, primarily related to phantom share awards, partially offset by higher professional service costs of $0.8 million and higher compensation expense of $0.4 million.

During the 13 weeks ended July 29, 2023, Corporate Services' selling and administrative expenses decreased by $2.3 million, or 31.8%, to $4.9 million from $7.2 million during the 13 weeks ended July 30, 2022.

The decrease in costs was primarily due to cost savings initiatives comprised of lower incentive plan compensation expense of $1.5 million, lower payroll expense of $0.6 million, and lower operating costs of $0.2 million.

Depreciation and Amortization Expense

13 weeks ended 39 weeks ended

Dollars in thousands January 28, 2023 % of

Sales January 29, 2022 % of

Sales January 28, 2023 % of

Sales January 29, 2022 % of

13 weeks ended

Dollars in thousands July 29, 2023 % of

Sales July 30, 2022 % of

Total Depreciation and Amortization Expense

$ 10,253 3.9% $ 10,896 4.3%

Depreciation and amortization expense decreased by $1.6 million, or 12.8%, to $10.6 million during the 13 weeks ended January 28, 2023 from $12.2 million during the 13 weeks ended January 29, 2022.

Depreciation and amortization expense decreased by $2.8 million, or 7.7%, to $33.9 million during the 39 weeks ended January 28, 2023 from $36.8 million during the 39 weeks ended January 29, 2022.

The decrease was primarily attributable to lower depreciable assets and intangibles due to the store impairment loss recognized during Fiscal 2023 and Fiscal 2022.

Impairment Loss (non-cash)

We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with ASC 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets .

During the 13 and 39 weeks ended January 28, 2023, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment.

Based on the results of the impairment tests, we recognized an impairment loss (non-cash) of $6.0 million (both pre-tax and after-tax), comprised of $0.7 million, $1.7 million, and $3.6 million of property and equipment, operating lease right-of-use assets, and amortizable intangibles, respectively, on the condensed consolidated statement of operations.

During the 13 and 39 weeks ended January 29, 2022, we evaluated certain of our store-level long-lived assets in the Retail segment for impairment.

Based on the results of the impairment tests, we recognized an impairment loss (non-cash) of $6.4 million (both pre-tax and after-tax), comprised of $0.7 million, $1.8 million, $3.7 million and $0.2 million of property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets, respectively, on the condensed consolidated statement of operations.

For additional information, see Item 1.

Financial Statements - Note 2.

Summary of Significant Accounting Policies and Note 6.

Fair Value Measurements .

Depreciation and amortization expense decreased by $0.6 million, or 5.9%, to $10.3 million during the 13 weeks ended July 29, 2023 from $10.9 million during the 13 weeks ended July 30, 2022.

The decrease was primarily attributable to lower depreciable assets and intangibles due to the store impairment loss recognized during Fiscal 2023.

Restructuring and other charges

During the 13 and 39 weeks ended January 28, 2023, we recognized restructuring and other charges totaling $6.0 million and $6.6 million, respectively, comprised primarily of $4.7 million in each period for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, and $1.3 million and $1.9 million, respectively, primarily for costs primarily associated with professional service costs for restructuring and process improvements.

During the 13 and 39 weeks ended January 29, 2022, we recognized restructuring and other charges totaling $0 and $3.1 million, respectively.

The $3.1 million for the 39 weeks ended January 29, 2022 is comprised primarily of $1.3 million for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, and $1.8 million for costs primarily associated with professional service costs for restructuring, process improvements, and development and integration associated with the F/L Partnership.

During the 13 weeks ended July 29, 2023, we recognized restructuring and other charges totaling $4.6 million, comprised primarily of $1.1 million for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost savings initiatives, and $3.5 million for costs primarily associated with professional service costs for restructuring and process improvements.

During the 13 weeks ended July 30, 2022, we recognized restructuring and other charges totaling $0.4 million, comprised primarily of costs primarily associated with professional service costs for restructuring and process improvements.

Operating Loss

13 weeks ended 39 weeks ended

Dollars in thousands January 28, 2023 % of

Sales January 29, 2022 % of

Sales January 28, 2023 % of

Sales January 29, 2022 % of

13 weeks ended

Dollars in thousands July 29, 2023 % of

Sales July 30, 2022 % of

Total Operating Loss $ (41,728) (15.8)% $ (45,607) (17.9)%

Our operating loss was $(17.9) million during the 13 weeks ended January 28, 2023, compared to operating loss of $(33.1) million during the 13 weeks ended January 29, 2022.

The decrease in operating loss is due to the matters discussed above.

For the 13 weeks ended January 28, 2023, excluding the $6.0 million of impairment loss (non-cash) and $6.0 million of restructuring and other charges, discussed above, operating loss was $(5.9) million (or (1.3)% of sales).

For the 13 weeks ended January 29, 2022, excluding the $6.4 million of impairment loss (non-cash), discussed above, operating loss was $(26.7) million (or (6.6)% of sales).

Our operating loss was $(39.0) million during the 39 weeks ended January 28, 2023, compared to operating loss of $(49.3) million during the 39 weeks ended January 29, 2022.

Our operating loss was $(41.7) million during the 13 weeks ended July 29, 2023, compared to operating loss of $(45.6) million during the 13 weeks ended July 30, 2022.

The decrease in operating loss is due to the matters discussed above.

For the 39 weeks ended January 28, 2023, excluding the $6.0 million of impairment loss (non-cash) and $6.6 million of restructuring and other charges, discussed above, operating loss was $(26.4) million (or (2.0)% of sales).

For the 39 weeks ended January 29, 2022, excluding the $0.4 million of merchandise inventory loss, the $6.4 million of impairment loss (non-cash) and the $3.1 million of restructuring and other charges, discussed above, operating loss was $(39.4) million (or (3.1)% of sales).

13 weeks ended July 29, 2023, excluding the $4.6 million of restructuring and other charges, discussed above, operating loss was $(37.1) million (or (14.0)% of sales).

For the 13 weeks ended July 30, 2022, excluding the $0.4 million of restructuring and other charges, discussed above, operating loss was $(45.2) million (or (17.8)% of sales).

Interest Expense, Net

13 weeks ended 39 weeks ended

Dollars in thousands January 28, 2023 January 29, 2022 January 28, 2023 January 29, 2022

13 weeks ended

Dollars in thousands July 29, 2023 July 30, 2022

Interest Expense, Net $ 8,254 $ 3,868

Net interest expense increased by $3.9 million to $6.9 million during the 13 weeks ended January 28, 2023 from $3.1 million during the 13 weeks ended January 29, 2022.

Net interest expense increased by $7.9 million to $15.7 million during the 39 weeks ended January 28, 2023 from $7.8 million during the 39 weeks ended January 29, 2022.

Net interest expense increased by $4.4 million to $8.3 million during the 13 weeks ended July 29, 2023 from $3.9 million during the 13 weeks ended July 30, 2022.

The increase was primarily due to higher borrowings and higher interest rates compared to the prior year.

Income Tax Expense

13 weeks ended 39 weeks ended

Dollars in thousands January 28, 2023 Effective Rate January 29, 2022 Effective Rate January 28, 2023 Effective Rate January 29, 2022 Effective Rate

Income Tax Expense $ 267 (1.1)% $ 615 (1.7)% $ 900 (1.6)% $ 811 (1.4)%

We recorded an income tax expense of $0.3 million on pre-tax loss of $(24.8) million during the 13 weeks ended January 28, 2023, which represented an effective income tax rate of (1.1)% and we recorded an income tax expense of $0.6 million on a pre-tax loss of $(36.2) million during the 13 weeks ended January 29, 2022, which represented an effective income tax rate of (1.7)%.

We recorded an income tax expense of $0.9 million on pre-tax loss of $(54.7) million during the 39 weeks ended January 28, 2023, which represented an effective income tax rate of (1.6)% and we recorded an income tax expense of $0.8 million on a pre-tax loss of $(57.1) million during the 39 weeks ended January 29, 2022, which represented an effective income tax rate of (1.4)%.

The effective tax rate for the 13 weeks ended January 28, 2023 is higher as compared to the prior year comparable period due to state tax adjustments recorded in the prior year.

The effective tax rate for the 39 weeks ended January 28, 2023 is lower as compared to the prior year comparable period due to foreign taxes and lower projected annual taxable loss in the current year.

13 weeks ended 39 weeks ended

Dollars in thousands January 28, 2023 January 29, 2022 January 28, 2023 January 29, 2022

Net loss $ (25,049) $ (36,801) $ (55,612) $ (57,901)

As a result of the factors discussed above, net loss was $(25.0) million during the 13 weeks ended January 28, 2023, compared with net loss of $(36.8) million during the 13 weeks ended January 29, 2022.

As a result of the factors discussed above, net loss was $(55.6) million during the 39 weeks ended January 28, 2023, compared with net loss of $(57.9) million during the 39 weeks ended January 29, 2022.

Adjusted Earnings (non-GAAP) is $(11.4) million during the 13 weeks ended January 28, 2023, compared with $(28.9) million during the 13 weeks ended January 29, 2022.

Adjusted Earnings (non-GAAP) is $(38.1) million during the 39 weeks ended January 28, 2023, compared with $(44.0) million during the 39 weeks ended January 29, 2022.

Income Tax (Benefit) Expense

13 weeks ended

Dollars in thousands July 29, 2023 Effective Rate July 30, 2022 Effective Rate

Income Tax (Benefit) Expense

$ (11) 0% $ 847 (1.7)%

We recorded an income tax benefit of $(0.01) million on pre-tax loss of $(50.0) million during the 13 weeks ended July 29, 2023, which represented an effective income tax rate of 0% and we recorded an income tax expense of $0.8 million on a pre-tax loss of $(49.5) million during the 13 weeks ended July 30, 2022, which represented an effective income tax rate of (1.7)%.

The effective tax rate for the 13 weeks ended July 29, 2023 is lower than the prior year comparable period due to the utilization of the discrete tax provision methodology in the current year.

For additional information, see Item 1.

Financial Statements - Note 12.

Income Taxes.

Net Loss from Continuing Operations

13 weeks ended

Dollars in thousands July 29, 2023 July 30, 2022

Net Loss from Continuing Operations $ (49,971) $ (50,322)

As a result of the factors discussed above, net loss from continuing operations was $(50.0) million during the 13 weeks ended July 29, 2023, compared with $(50.3) million during the 13 weeks ended July 30, 2022.

Adjusted Earnings (non-GAAP) is $(45.3) million during the 13 weeks ended July 29, 2023, compared with $(49.9) million during the 13 weeks ended July 30, 2022.

See Adjusted Earnings (non-GAAP) discussion below.

1 unchanged sentence

To supplement our results prepared in accordance with generally accepted accounting principles (“GAAP”), we use the measure of Adjusted Earnings, Adjusted EBITDA, Adjusted EBITDA by Segment, and Free Cash Flow, which are non-GAAP financial measures under Securities and Exchange Commission (the “SEC”) regulations.

We define Adjusted Earnings as net income adjusted for certain reconciling items that are subtracted from or added to net income (loss).

We define Adjusted EBITDA as net income (loss) plus (1) depreciation and amortization;

(2) interest expense and (3) income taxes, (4) as adjusted for items that are subtracted from or added to net income (loss).

We define Adjusted Earnings as net income from continuing operations adjusted for certain reconciling items that are subtracted from or added to net income (loss) from continuing operations.

We define Adjusted EBITDA as net income (loss) from continuing operations plus (1) depreciation and amortization;

(2) interest expense and (3) income taxes, (4) as adjusted for items that are subtracted from or added to net income (loss) from continuing operations.

We define Free Cash Flow as Cash Flows from Operating Activities less capital expenditures, cash interest and cash taxes.

To properly and prudently evaluate our business, we encourage you to review our condensed consolidated financial statements included elsewhere in this Form 10-Q, the reconciliation of Adjusted Earnings to net income (loss), the reconciliation of consolidated Adjusted EBITDA to consolidated net income (loss), and the reconciliation of Adjusted EBITDA by Segment to net income (loss) by segment, the most directly comparable financial measure presented in accordance with GAAP, set forth in the tables below.

To properly and prudently evaluate our business, we encourage you to review our condensed consolidated financial statements included elsewhere in this Form 10-Q, the reconciliation of Adjusted Earnings to net income (loss) from continuing operations, the reconciliation of consolidated Adjusted EBITDA to consolidated net income (loss) from continuing operations, and the reconciliation of Adjusted EBITDA by Segment to net income (loss) from continuing operations by segment, the most directly comparable financial measure presented in accordance with GAAP, set forth in the tables below.

All of the items included in the reconciliations below are either (i) non-cash items or (ii) items that management does not consider in assessing our on-going operating performance.

8 unchanged sentences

We believe that Free Cash Flow provides useful additional information concerning cash flow available to meet future debt service obligations and working capital requirements and assists investors in their understanding of our operating profitability and liquidity as we manage the business to maximize margin and cash flow.

Consolidated Adjusted Earnings (non-GAAP)

13 weeks ended 39 weeks ended

Dollars in thousands January 28, 2023 January 29, 2022 January 28, 2023 January 29, 2022

Net loss $ (25,049) $ (36,801) $ (55,612) $ (57,901)

Reconciling items (below)

Consolidated Adjusted Earnings (non-GAAP) - Continuing Operations

13 weeks ended

Dollars in thousands July 29, 2023 July 30, 2022

Net loss from continuing operations (a)

$ (49,971) $ (50,322)

Reconciling items (below)

Adjusted Earnings (non-GAAP) $ (45,338) $ (49,921)

Reconciling items

Impairment loss (non-cash) (a)

$ 6,008 $ 6,411 $ 6,008 $ 6,411

Merchandise inventory loss (a)

Content amortization (non-cash)

1,686 1,398 4,881 3,984

Restructuring and other charges (a)

Restructuring and other charges (b)

Reconciling items (c)

$ 4,633 $ 401

Reconciling items (b)

(a) During the fourth quarter of fiscal 2023, assets related to our Digital Student Solutions ("DSS") Segment met the criteria for classification as Assets Held for Sale and Discontinued Operations.

Net Loss from Continuing Operations excludes the results of operations related to the DSS Segment for all years reported above.

(b) See Management Discussion and Analysis and Results of Operations discussion above.

Consolidated Adjusted EBITDA (non-GAAP) - Continuing Operations

13 weeks ended

Dollars in thousands July 29, 2023 July 30, 2022

Net loss from continuing operations (a)

$ (49,971) $ (50,322)

(a) See Management Discussion and Analysis and Results of Operations discussion above.

(b) There is no pro forma income effect of the non-GAAP items.

Consolidated Adjusted EBITDA (non-GAAP)

13 weeks ended 39 weeks ended

Dollars in thousands January 28, 2023 January 29, 2022 January 28, 2023 January 29, 2022

Net loss $ (25,049) $ (36,801) $ (55,612) $ (57,901)

Depreciation and amortization expense 10,253 10,896

Interest expense, net 8,254 3,868

Income tax expense 267 615 900 811

Impairment loss (non-cash) (a)

6,008 6,411 6,008 6,411

Merchandise inventory loss (a)

Content amortization (non-cash)

1,686 1,398 4,881 3,984

Restructuring and other charges (a)

5,975 46 6,610 3,067

Adjusted EBITDA (non-GAAP) $ 6,423 $ (13,101) $ 12,369 $ 1,370

(a) See Management Discussion and Analysis and Results of Operations discussion above.

The following is Adjusted EBITDA by segment for the 13 and 39 weeks ended January 28, 2023 and January 29, 2022.

Adjusted EBITDA - by Segment 13 weeks ended January 28, 2023

Dollars in thousands Retail Wholesale DSS Corporate Services (a)

Income tax (benefit) expense

Content amortization (non-cash) (d)

Restructuring and other charges (c)

Adjusted EBITDA (Non-GAAP) - Continuing Operations $ (26,842) $ (34,310)

Adjusted EBITDA (Non-GAAP) - Discontinued Operations $ 427 $ 889

Adjusted EBITDA (Non-GAAP) - Total $ (26,415) $ (33,421)

(a) During the fourth quarter of fiscal 2023, assets related to our Digital Student Solutions ("DSS") Segment met the criteria for classification as Assets Held for Sale and Discontinued Operations.

Net Loss from Continuing Operations excludes the results of operations related to the DSS Segment for all years reported above.

(b) See Management Discussion and Analysis and Results of Operations discussion above.

The following is Adjusted EBITDA by Segment for the 13 weeks ended July 29, 2023 and July 30, 2022.

Adjusted EBITDA - by Segment 13 weeks ended July 29, 2023

Dollars in thousands Retail Wholesale Corporate Services (b)

Eliminations Total

Net (loss) income $ (10,036) $ 817 $ (2,787) $ (14,507) $ 1,464 $ (25,049)

Depreciation and amortization expense 8,749 1,357 506 6 — 10,618

Interest expense, net — — — 6,918 — 6,918

Income tax expense — — — 267 — 267

Impairment loss (non-cash) (a)

6,008 — — — — 6,008

Content amortization (non-cash) — — 1,686 — — 1,686

Restructuring and other charges (b)

Net (loss) income from continuing operations (a)

$ (28,374) $ 603 $ (16,752) $ (5,448) $ (49,971)

Adjusted EBITDA (non-GAAP) $ 6,173 $ 3,105 $ 1,253 $ (5,572) $ 1,464 $ 6,423

Adjusted EBITDA - by Segment 13 weeks ended January 29, 2022

Dollars in thousands Retail Wholesale DSS Corporate Services (a)

Eliminations Total

Net (loss) income $ (30,845) $ 2,767 $ (1,669) $ (8,854) $ 1,800 $ (36,801)

Depreciation and amortization expense 8,966 1,277 10 — 10,253

Interest expense, net — — 8,254 — 8,254

Income tax expense — — — 615 — 615

Impairment loss (non-cash) (a)

Income tax benefit

— — (11) — (11)

Content amortization (non-cash) 79 — 1,319 — — 1,398

Restructuring and other charges (b)

Restructuring and other charges (c)

526 526 3,581 — 4,633

Adjusted EBITDA (non-GAAP) $ (18,882) $ 2,406 $ (4,918) $ (5,448) $ (26,842)

Adjusted EBITDA - by Segment 39 weeks ended January 28, 2023

Dollars in thousands Retail Wholesale DSS Corporate Services (a)

Adjusted EBITDA - by Segment 13 weeks ended July 30, 2022

Dollars in thousands Retail Wholesale Corporate Services (b)

Eliminations Total

Net (loss) income $ (14,029) $ 2,454 $ (7,027) $ (36,853) $ (157) $ (55,612)

Net (loss) income from continuing operations (a)

$ (34,540) $ 1,419 $ (12,322) $ (4,879) $ (50,322)

Depreciation and amortization expense 9,529 1,349 18 — 10,896

1 unchanged sentence

Income tax expense — — 847 — 847

Impairment loss (non-cash) (a)

6,008 — — — — 6,008

Content amortization (non-cash) 26 — — — 26

Restructuring and other charges (b)

Restructuring and other charges (c)

— — 375 — 375

Adjusted EBITDA (non-GAAP) $ (24,985) $ 2,768 $ (7,214) $ (4,879) $ (34,310)

Adjusted EBITDA - by Segment 39 weeks ended January 29, 2022

Dollars in thousands Retail Wholesale DSS Corporate Services (a)

Eliminations Total

Net (loss) income $ (31,887) $ 7,750 $ (5,286) $ (29,034) $ 556 $ (57,901)

(a) During the fourth quarter of fiscal 2023, assets related to our Digital Student Solutions ("DSS") Segment met the criteria for classification as Assets Held for Sale and Discontinued Operations.

Net Loss from Continuing Operations excludes the results of operations related to the DSS Segment for all years reported above.

(b) See Management Discussion and Analysis and Results of Operations discussion above.

(c) Interest expense is reflected in Corporate Services as it is primarily related to our Credit Agreement and Term Loan Agreement which fund our operating and financing needs across the organization.

Income taxes are reflected in Corporate Services as we record our income tax provision on a consolidated basis.

Adjusted EBITDA (non-GAAP) - Discontinued Operations 13 weeks ended

July 29, 2023 July 30, 2022

Loss from discontinued operations (a)

$ (417) $ (2,385)

Depreciation and amortization expense — 1,637

Interest expense, net — — — 7,809 — 7,809

Income tax expense 20 86

Impairment loss (non-cash) (a)

6,411 — — — — 6,411

Merchandise inventory loss (b)

434 — — — — 434

Content amortization (non-cash) — 1,551

Restructuring and other charges (b)

2,113 — — 954 — 3,067

Adjusted EBITDA (non-GAAP) $ 4,436 $ 11,810 $ 3,975 $ (19,407) $ 556 $ 1,370

(a) Interest expense is reflected in Corporate Services as it is primarily related to our Credit Agreement and Term Loan Agreement which fund our operating and financing needs across the organization.

Income taxes are reflected in Corporate Services as we record our income tax provision on a consolidated basis.

(b) See Management Discussion and Analysis and Results of Operations discussion above.

Gain on sale of business (3,068) —

Impairment loss (non-cash) 610 —

Restructuring and other charges 3,287 —

Transaction costs (5) —

Adjusted EBITDA (Non-GAAP) - Discontinued Operations $ 427 $ 889

(a) During the fourth quarter of fiscal 2023, assets related to our Digital Student Solutions ("DSS") Segment met the criteria for classification as Assets Held for Sale and Discontinued Operations.

Net Loss from Continuing Operations excludes the results of operations related to the DSS Segment for all years reported above.

For additional information, see Note 2.

Summary of Significant Accounting Policies.

Free Cash Flow (non-GAAP)

13 weeks ended 39 weeks ended

Dollars in thousands January 28, 2023 January 29, 2022 January 28, 2023 January 29, 2022

Net cash flows (used in) provided by operating activities $ (31,958) $ (16,375) $ (22,582) $ 7,901

13 weeks ended

Dollars in thousands July 29, 2023 July 30, 2022

Net cash flows used in operating activities from continuing operations $ ( 119,858 ) $ ( 28,607 )

Capital expenditures (a)

6,326 12,129 26,899 33,393

Cash interest 5,534 2,933

2 unchanged sentences

(a) Purchases of property and equipment are also referred to as capital expenditures.

Our investing activities consist principally of capital expenditures for contractual capital investments associated with renewing existing contracts, new store construction, digital initiatives and enhancements to internal systems and our website.

Our investing activities consist principally of capital expenditures for contractual capital investments associated with renewing existing contracts, new store construction, and enhancements to internal systems and our website.

The following table provides the components of total purchases of property and equipment:

Capital Expenditures 13 weeks ended 39 weeks ended

Dollars in thousands January 28, 2023 January 29, 2022 January 28, 2023 January 29, 2022

Capital Expenditures 13 weeks ended

Dollars in thousands July 29, 2023 July 30, 2022

Physical store capital expenditures $ 2,205 $ 4,496

Product and system development 1,763 2,486

Content development costs 1,168 2,037 4,481 6,749

Other 251 548

1 unchanged sentence

Liquidity and Capital Resources

Our primary sources of cash are net cash flows from operating activities, funds available under our credit agreement and short-term vendor financing.

As of January 28, 2023, we had $255.6 million and $30.0 million outstanding borrowings under the Credit Agreement and Term Loan Agreement, respectively.

See Financing Arrangements discussion below.

On March 8, 2023, subsequent to quarter end, we amended our existing Credit Agreement to, among other things, extend the maturity date thereunder by six months to August 29, 2024.

The amendment also reduces the commitments under the Credit Agreement by $20,000 to $380,000.

On March 8, 2023, subsequent to quarter end, we amended the Term Loan Credit Agreement to, among other things, extend the maturity date thereunder by six months to December 7, 2024.

For additional information, see Financing Arrangements below .

We believe that our future cash from operations, access to borrowings under the Credit Agreement and Term Loan Agreement will provide adequate resources to fund our operating and financing needs for the foreseeable future.

Our future capital requirements will depend on many factors, including, but not limited to, the economy and the outlook for and pace of sustainable growth in our markets, the levels at which we maintain inventory, the number and timing of new store openings, and any potential acquisitions of other brands or companies including digital properties.

To the extent that available funds are insufficient to fund our future activities, we may need to raise additional funds through public or private financing of debt or equity.

Our access to, and the availability of, financing in the future will be impacted by many factors, including the liquidity of the overall capital markets and the current state of the economy.

There can be no assurances that we will have access to capital markets on acceptable terms.

COVID-19 Business Impact

Our business has been significantly negatively impacted by the COVID-19 pandemic, as many schools adjusted their learning models and on-campus activities.

However, on campus traffic continues to grow from increased campus events and activities, as compared to the last two years.

Our third quarter 2022 results were negatively impacted by a Covid variant experienced on campuses across the country during the 2022 Spring Term which did not recur during the 2023 Spring Term.

While the impact of COVID-19 pandemic are lessening, we cannot accurately predict the duration or extent of the impact of the COVID-19 virus, including variants, on enrollments, campus activities, university budgets, athletics and other areas that

directly affect our business operations .

Although most four year schools returned to a traditional on-campus environment for learning, there is still uncertainty about the duration and extent of the impact of the COVID-19 pandemic, including on enrollments at community colleges and by international students, the continuation of remote and hybrid class offerings, and its effect on our ability to source products, including textbooks and general merchandise offerings.

We will continue to assess our operations and will continue to consider the guidance of local governments and our campus partners to determine how to operate our bookstores in the safest manner for our employees and customers.

If economic conditions caused by the pandemic do not recover as currently estimated by management or market factors currently in place change, there could be a further impact on our results of operations, financial condition and cash flows from operations.

Sources and Uses of Cash Flow

The accompanying condensed consolidated financial statements are prepared in accordance with U.S.

GAAP applicable to a going concern.

This presentation contemplates the realization of assets and the satisfaction of liabilities in the normal course of business and does not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described below.

Pursuant to ASC 205-40, Presentation of Financial Statements — Going Concern (“ASC 205-40”) , management must evaluate whether there are conditions and events, considered in aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that these condensed consolidated financial statements are issued.

In accordance with ASC 205-40, management’s analysis can only include the potential mitigating impact of management’s plans that have not been fully implemented as of the issuance date of these condensed consolidated financial statements if (a) it is probable that management’s plans will be effectively implemented on a timely basis, and (b) it is probable that the plans, when implemented, will alleviate the relevant conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern.

Our primary sources of cash are net cash flows from operating activities, funds available under our Credit Agreement, Term Loan Agreement, and short-term vendor financing.

Our liquidity is highly dependent on the seasonal nature of our business, particularly with respect to course material sales, as sales are generally highest in the second and third fiscal quarters, when college students generally purchase textbooks for the upcoming Fall and Spring semesters, respectively.

As of July 29, 2023, we had $19.3 million of cash on hand, including $10.7 million of restricted cash related to segregated funds for commission due to Fanatics for logo merchandise sales as per the merchandising partnership agreement.

Our business was significantly negatively impacted by the COVID-19 pandemic during the years ended April 30, 2022 and May 1, 2021, as many schools adjusted their learning models and on-campus activities.

Although most academic institutions have since reopened after the COVID-19 pandemic, the lingering impacts of the pandemic have resulted in changes in customer behaviors, lower enrollments, and an evolving educational landscape which continued to impact our financial results during the year ended April 29, 2023.

Some institutions are still providing alternatives to traditional in-person instruction, including online and hybrid learning options and significantly reduced classroom sizes.

The impact of COVID-19 store closings, as well as lower earnings during the year ended April 29, 2023, resulted in the loss of cash flows and increased borrowings that we would not otherwise have expected to incur.

We incurred a Net Loss from Continuing Operations of $(50.9) million and $(50.3) million for the 13 weeks ended July 29, 2023 and July 30, 2022, respectively, and we incurred a Net Loss from Continuing Operations of $(90.1) million , $(61.6) million , and $(133.6) million for the years ended April 29, 2023, April 30, 2022, and May 1, 2021, respectively.

Our Cash Flow Used In Operating Activities from Continuing Operations were $(119.9) million and $(28.6) million for the 13 weeks ended July 29, 2023 and July 30, 2022, respectively, and were $90.5 million , $(16.2) million , and $27.0 million , for the years ended April 29, 2023, April 30, 2022, and May 1, 2021, respectively.

The tightening of our available credit commitments, including the elimination and repayment of our seasonal borrowing facility (FILO Facility) of $40.0 million, has had a significant impact on our liquidity during the year ended April 29, 2023, including our ability to make timely vendor payments and school commission payments, resulting in a positive cash flow from operations offset by a use of cash for financing activities.

Our losses and projected cash needs, combined with our current liquidity level, raised substantial doubt about our ability to continue as a going concern as of the year ended April 29, 2023, which Management subsequently remediated by implementing a plan to improve the Company’s liquidity and successfully alleviate substantial doubt including (1) raising additional liquidity an d (2) taking additional operational restructuring actions.

Debt amendments

On July 28, 2023, we amended our existing Credit Agreement to (i) extend the maturity date of the Credit Agreement to December 28, 2024, (ii) reduce advance rates with respect to the borrowing base by 1000 basis points on September 2, 2024 (in lieu of the reductions previously contemplated for September 2023), (iii) subject to the conditions set forth in such amendment, add a CARES Act tax refund claim to the borrowing base, from April 1, 2024 through July 31, 2024, (iv) amend the financial maintenance covenant to require Availability (as defined in the Credit Agreement) at all times greater than the greater of (x) 10% of the Aggregate Loan Cap (as defined in the Credit Agreement) and (y) (A) $32.5 million minus, subject to the conditions set forth in such amendment, (B) (a) $7.5 million for the period of April 1, 2024 through and including April 30, 2024, (b) $2.5 million for the period of May 1, 2024 through and including May 31, 2024 and (c) $0 at all other times, (v) add a minimum Consolidated EBITDA (as defined in the Credit Agreement) financial maintenance covenant, and (vi) amend certain negative and affirmative covenants and add certain additional covenants, all as more particularly set forth in such amendment.

The amendment also requires that we appoint a Chief Restructuring Officer and that, by August 11, 2023, we (i) appoint two independent members to the board of directors of the Company from prospective candidates that have been previously disclosed to the Administrative Agent and the Lenders and (ii) appoint a committee of the board of directors of the Company to consist of three board members (two of whom will be the new independent directors), and as of the date of this filing, we have satisfied such requirements.

The committee’s responsibilities will include, among other things, to explore, consider, solicit expressions of interest or proposals for, respond to any communications, inquiries or proposals regarding, and advise as to all strategic alternatives to effect a “Specified Liquidity Transaction” (as defined in the Credit Agreement).

There can be no guarantee or assurances that any such transaction or transactions be consummated.

We must pay (i) a fee of 0.50% of the outstanding principal amount of the commitments under the Credit Agreement March 2023 amendment (as defined in the Credit Agreement) on the closing date (in lieu of the deferred fee previously contemplated in connection with the March 2023 amendment (as defined in the Credit Agreement)) and (ii) a fee of 1.00% of the outstanding principal amount of the commitments under the Credit Agreement as of the closing date on the earlier to occur of September 2, 2024 and an Event of Default (as defined in the Credit Agreement).

On July 28, 2023, we amended our Term Loan to (i) extend the maturity date of the Term Loan Agreement to April 7, 2025, (ii) allow for interest to be paid in kind until September 2, 2024, (iii) amend the 1.50% anniversary fee to recur on June 7 of each year that the Term Loan Agreement remains outstanding, with 2024 fee deferred to the earlier of September 2, 2024 and the Termination Date (as defined in the Term Loan Agreement) and (iv) amend certain negative covenants and affirmative and add certain additional covenants.

We must pay a fee of $0.05 million to the lenders under the Term Loan Agreement on the earlier of September 2, 2024 and the Termination Date (as defined in the Term Loan Agreement).

Operational restructuring plans

We have implemented a significant cost reduction program designed to streamline our operations, maximize productivity and drive profitability.

We have achieved meaningful cost savings from this program of approximately $17.0 million d uring the second half of the year ended April 29, 2023.

These initiatives are expected to provide annualized savings of $30.0 million to $35.0 million in Fiscal 2024.

Management's plans over the next twelve months include the further reduction of gross capital expenditures and other cost saving measures of approximately $25.0 million.

Management believes that these plans are within its control and probable of being implemented on a timely basis.

During the 13 weeks ended July 29, 2023, Net Loss from Continuing Operations decreased by $0.3 million compared to the prior year period.

During the 13 weeks ended July 29, 2023, Net Loss from Continuing Operations, excluding interest expense and restructuring and other charges, improved by $9.0 million primarily due to operational improvements and cost

savings initiatives.

As discussed below, our first quarter is generally a low sales period, as the majority of sales and operating profit will be realized during the second and third quarters.

Management believes that the expected impact on our liquidity and cash flows resulting from the debt amendments and the operational initiatives outlined above are sufficient to enable the Company to meet its obligations for at least twelve months from the issuance date of these condensed consolidated financial statements and to continue to alleviate the conditions that initially raised substantial doubt about the Company's ability to continue as a going concern.

See Part I - Risk Factors - We are dependent upon access to the capital markets, bank credit facilities, and short-term vendor financing for liquidity needs in our Annual Report on Form 10-K for the fiscal year ended April 29, 2023 .

Sources and Uses of Cash Flow - Continuing Operations

13 weeks ended

Dollars in thousands January 28, 2023 January 29, 2022

Cash, cash equivalents, and restricted cash at beginning of period $ 21,934 $ 16,814

Net cash flows (used in) provided by operating activities (22,582) 7,901

Net cash flows used in investing activities (26,327) (32,659)

Net cash flows provided by financing activities 56,422 20,686

Cash, cash equivalents, and restricted cash at end of period $ 29,447 $ 12,742

As of January 28, 2023 and January 29, 2022, we had restricted cash of $18.3 million and $2.8 million, respectively, comprised of $17.4 million and $1.9 million, respectively, in prepaid and other current assets in the consolidated balance sheet related to segregated funds for commission due to Lids for logo merchandise sales as per the F/L Partnership's merchandising agreement and $0.9 million for both periods in other noncurrent assets in the condensed consolidated balance sheet related to amounts held in trust for future distributions related to employee benefit plans.

Cash Flow from Operating Activities

Dollars in thousands July 29, 2023 July 30, 2022

Net cash flows used in operating activities from continuing operations $ (119,858) $ (28,607)

Net cash flows used in investing activities from continuing operations (4,141) (7,530)

Net cash flows provided by financing activities from continuing operations 93,176 33,429

Net change in cash, cash equivalents, and restricted cash from continuing operations $ (30,823) $ (2,708)

As of July 29, 2023 and July 30, 2022, we had restricted cash of $11.6 million and $7.5 million, respectively, comprised of $10.7 million and $6.6 million, respectively, in prepaid and other current assets in the condensed consolidated balance sheet related to segregated funds for commission due to Lids for logo merchandise sales as per the Lids Partnership's merchandising agreement and $0.9 million for both periods in other noncurrent assets in the condensed consolidated balance sheet related to amounts held in trust for future distributions related to employee benefit plans.

Cash Flow from Operating Activities from Continuing Operations

Our business is highly seasonal.

For our retail operations, cash flows from operating activities are typically a source of cash in the second and third fiscal quarters, when students generally purchase and rent textbooks and other course materials for the upcoming semesters based on the typical academic semester.

Given the growth of First Day programs and the timing of cash collection from our school partners, the third fiscal quarter which has been a source of cash has shifted to the fourth quarter.

When a school adopts our First Day inclusive and equitable access offerings, cash collection from the school generally occurs after the student drop/add dates, which is later in the working capital cycle, particularly in our third quarter given the timing of the Spring Term and our quarterly reporting period, as compared to direct-to-student point-of-sale transactions where cash is generally collected during the point-of-sale transaction or within a few days from the credit card processor.

As a higher percentage of our sales shift to First Day inclusive and equitable access offerings, we are focused on efforts to better align the timing of our cash outflows to course material vendors with cash inflows collected from schools.

For our wholesale operations, cash flows from operating activities are typically a source of cash in the second and fourth fiscal quarters, as payments are received from the summer and winter selling season when they sell textbooks and other course materials for retail distribution.

Given the growth of our BNC First Day programs, the timing of cash collection from our school partners may shift to periods subsequent to when the revenue is recognized.

As a higher percentage of our sales shift to BNC First Day equitable and inclusive access offerings, we are focused on efforts to better align the timing of our cash outflows to course material vendors with cash inflows collected from schools, including modifying payment terms in existing and future school contracts.

For our wholesale operations, cash flows from operating activities are typically a source of cash in the second and third fiscal quarters, as payments are received from the summer and winter selling season when our wholesale business sell textbooks and other course materials for retail distribution.

For both retail and wholesale, cash flows from operating activities are typically a use of cash in the fourth fiscal quarter, when sales volumes are materially lower than the other quarters.

For our DSS segment, cash flows are not seasonal as cash flows from operating activities are typically consistent throughout the year.

Our quarterly cash flows also may fluctuate depending on the timing of the start of the various school’s semesters, as well as shifts in our fiscal calendar dates.

These shifts in timing may affect the comparability of our results across periods.

Cash flows used in operating activities during the 39 weeks ended January 28, 2023 were $(22.6) million compared to cash flows provided by operating activities $7.9 million during the 39 weeks ended January 29, 2022.

This decrease in cash flows provided by operating activities of $30.5 million was primarily due to changes in our working capital in our third quarter due to increased adoption of our First Day inclusive and equitable access offering in the third quarter of 2023 compared to 2022.

During the 13 weeks ended January 28, 2023, First Day Complete sales increased $28.9 million to $66.9 million, or 76%, as compared to $38.0 million in the prior year period, which resulted in higher inventory purchases and higher receivables, offset by higher payables and right-of-use payments during the third quarter in the current year period compared to the prior year period.

Cash Flow from Investing Activities

Cash flows used in investing activities during the 39 weeks ended January 28, 2023 were $(26.3) million compared to $(32.7) million during the 39 weeks ended January 29, 2022.

The decrease in cash used in investing activities is primarily due to lower capital expenditures and contractual capital investments associated with content development, digital initiatives,

enhancements to internal systems and websites, and new store construction.

Capital expenditures totaled $26.9 million and $33.4 million during the 39 weeks ended January 28, 2023 and January 29, 2022, respectively.

Cash Flow from Financing Activities

Cash flows provided by financing activities during the 39 weeks ended January 28, 2023 were $56.4 million compared to $20.7 million during the 39 weeks ended January 29, 2022.

This net change of $35.7 million is primarily due to higher net borrowings.

Cash flows used in operating activities from continuing operations during the 13 weeks ended July 29, 2023 were $(119.9) million compared to $(28.6) million during the 13 weeks ended July 30, 2022.

This increase in cash flows used in operating activities from continuing operations of $91.3 million was primarily due to timing of payables primarily due to delayed payments to vendors for inventory purchases and expenses, which were delayed resulting from lower borrowing base availability, increased accounts receivables primarily related to our increased adoption of our BNC First Day equitable and inclusive access sales for Summer terms;

and higher interest expense paid.

Cash Flow from Investing Activities from Continuing Operations

Cash flows used in investing activities from continuing operations during the 13 weeks ended July 29, 2023 were $(4.1) million compared to $(7.5) million during the 13 weeks ended July 30, 2022.

The decrease in cash used in investing activities is primarily due to lower capital expenditures and contractual capital investments, enhancements to internal systems and websites, and new store construction.

Capital expenditures totaled $4.2 million and $7.5 million during the 13 weeks ended July 29, 2023 and July 30, 2022, respectively.

Cash Flow from Financing Activities from Continuing Operations

Cash flows provided by financing activities from continuing operations during the 13 weeks ended July 29, 2023 were $93.2 million compared to $33.4 million during the 13 weeks ended July 30, 2022.

This net change of $59.8 million is primarily due to higher net borrowings and higher payments for deferred financing costs.

Financing Arrangements

July 29, 2023 July 30, 2022

Credit Facility $ 249,735 $ 190,300

We have a credit agreement (the “Credit Agreement”), amended from time to time, including on March 31, 2021 and March 1, 2019, under which the lenders committed to provide us with a 5-year asset-backed revolving credit facility in an aggregate committed principal amount of $400 million (the “Credit Facility”) effective from the March 1, 2019 amendment.

FILO Facility — 40,000

Term Loan 30,000 30,000

sub-total 279,735 260,300

Deferred financing costs (2,072) (1,750)

Total debt $ 277,663 $ 258,550

Balance Sheet classification:

Short-term borrowings $ — $ 40,000

Long-term borrowings 277,663 218,550

Total debt $ 277,663 $ 258,550

Credit Facility

We have a credit agreement (the “Credit Agreement”), amended from time to time including on July 28,2023, May 24, 2023, March 8, 2023, March 31, 2021 and March 1, 2019, under which the lenders originally committed to provide us with a 5 year asset-backed revolving credit facility in an aggregate committed principal amount of $400.0 million (the “Credit Facility”) effective from the March 1, 2019 amendment.

We had the option to request an increase in commitments under the Credit Facility of up to $100.0 million, subject to certain restrictions.

1 unchanged sentence

The agreement included an incremental first in, last out seasonal loan facility (the “FILO Facility”) for a $100.0 million maintaining the maximum availability under the Credit Agreement at $500.0 million.

From and after July 31, 2022, commitments under the FILO Facility were reduced to $0.

As of January 28, 2023, we were in compliance with all debt covenants under the Credit Agreement.

On March 8, 2023, subsequent to quarter end, we amended our existing Credit Agreement to (i) extend the maturity date of the Credit Agreement by six months to August 29, 2024, (ii) reduce the commitments under the Credit Agreement by $20 million to $380 million, (iii) increase the applicable margin with respect to the interest rate under the Credit Agreement to 3.375% per annum, in the case of interest accruing based on a Secured Overnight Financing Rate, and 2.375%, in the case of interest accruing based on an alternative base rate, in each case, without regard to a pricing grid, (iv) reduce advance rates with respect to the borrowing base (x) by 500 basis points upon the achievement of certain liquidity events, which may include a sale of equity interests or of assets (a “Specified Event”), or, if such a Specified Event shall not have occurred, on May 31, 2023 and (y) by an additional 500 basis points on September 29, 2023, (v) amend certain negative covenants and add certain additional covenants, (vi) amend the financial maintenance covenant to require Availability (as defined in the Credit Agreement) to be at all times greater than the greater of 10% of the Aggregate Loan Cap (as defined in the Credit Agreement) and $32.5 million and (vii) require repayment of the loans under the Credit Agreement upon a Specified Event.

In addition, the amendment requires the achievement of a Specified Event by no later than May 31, 2023 (as such date may be extended pursuant to the terms fo the Credit Agreement).

During the 39 weeks ended January 28, 2023, we borrowed $512.0 million and repaid $452.1 million under the Credit Agreement, with $255.6 million of outstanding borrowings as of January 28, 2023, comprised entirely of borrowings under the Credit Facility.

During the 39 weeks ended January 29, 2022, we borrowed $463.2 million and repaid $440.4 million under the Credit Agreement, with $200.4 million of outstanding borrowings as of January 29, 2022, comprised entirely of borrowings under the Credit Facility.

As of both January 28, 2023 and January 29, 2022, we have issued $4.8 million in letters of credit under the Credit Facility.

For additional information including interest terms and covenant requirements related to the Credit Facility and FILO Facility, refer to Part II - Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

On June 7, 2022, we entered into a Term Loan Credit Agreement (the “Term Loan Credit Agreement”) with TopLids LendCo, LLC and Vital Fundco, LLC and we entered an amendment to our existing Credit Agreement.

As of July 31, 2022, the FILO Facility was repaid and eliminated according to its terms and future commitments under the FILO Facility were reduced to $0.

March 2023 Credit Agreement Amendment

On March 8, 2023, we amended our existing Credit Agreement to (i) extend the maturity date of the Credit Agreement by six months to August 29, 2024, (ii) reduce the commitments under the Credit Agreement by $20.0 million to $380.0 million, (iii) increase the applicable margin with respect to the interest rate under the Credit Agreement to 3.375% per annum, in the case of interest accruing based on a Secured Overnight Financing Rate, and 2.375%, in the case of interest accruing based on an alternative base rate, in each case, without regard to a pricing grid, (iv) reduce advance rates with respect to the borrowing base (x) by 500 basis points upon the achievement of certain liquidity events, which may include a sale of equity interests or of assets (a “Specified Event”), or, if such a Specified Event shall not have occurred, on May 31, 2023 (see discussion below) and (y) by an additional 500 basis points on September 29, 2023, (v) amend certain negative covenants and add certain additional covenants, (vi) amend the financial maintenance covenant to require Availability (as defined in the Credit Agreement) to be at all times greater than the greater of 10% of the Aggregate Loan Cap (as defined in the Credit Agreement) and $32.5 million and (vii) require repayment of the loans under the Credit Agreement upon a Specified Event.

For additional information related to the Credit Agreement amendment, see the Company’s Report on Form 8-K dated March 8, 2023 and filed with the SEC on March 9, 2023.

As noted above, the amendment requires the achievement of a Special Event by no later than May 31, 2023 (as such date may be extended pursuant to the terms of the Credit Agreement).

Summary of Significant Accounting Policies for information related to the sale of our DSS segment on May 31, 2023 .

We paid a fee of 0.25% of the outstanding principal amount of the commitments under the Credit Agreement on the amendment closing date and we will pay an additional fee of 1.00% of the outstanding principal amount of the commitments under the Credit Agreement on September 29, 2023.

During the 52 weeks ended April 29, 2023, we incurred debt issuance costs totaling $4.1 million related to the March 2023 Credit Agreement amendment.

The debt issuance costs have been deferred and are presented as prepaid and other current assets and other noncurrent assets in the condensed consolidated balance sheets, and subsequently amortized ratably over the term of the credit agreement.

May 2023 Credit Agreement Amendment

On May 24, 2023, we amended our existing Credit Agreement to (i) increase the applicable margin with respect to the interest rate under the Credit Agreement to 3.75% per annum, in the case of interest accruing based on SOFR, and 2.75%, in the case of interest accruing based on an alternative base rate, in each case, without regard to a pricing grid, (ii) defer the reduction of advance rates used to calculate our borrowing capacity by an amount equal to 500 basis points previously required on May 31, 2023 to September 1, 2023, (iii) require cash flow reporting and variance testing commencing June 3, 2023 and (iv) defer partial prepayment of the term loan from the DSS segment sale proceeds to September 1, 2023.

We did not incur debt issuance costs related to the May 2023 Credit Agreement amendment.

For additional information related to the Credit Agreement amendment, see the Company’s Report on Form 8-K dated May 24, 2023 and filed with the SEC on May 31, 2023.

July 2023 Credit Agreement Amendment

On July 28, 2023, we amended our existing Credit Agreement to (i) extend the maturity date of the Credit Agreement to December 28, 2024, (ii) reduce advance rates with respect to the borrowing base by 1000 basis points on September 2, 2024 (in lieu of the reductions previously contemplated for September 2023), (iii) subject to the conditions set forth in such amendment, add a CARES Act tax refund claim to the borrowing base, from April 1, 2024 through July 31, 2024, (iv) amend the financial maintenance covenant to require Availability (as defined in the Credit Agreement) at all times greater than the greater of (x) 10% of the Aggregate Loan Cap (as defined in the Credit Agreement) and (y) (A) $32.5 million minus, subject to the conditions set forth in such amendment, (B) (a) $7,500 for the period of April 1, 2024 through and including April 30, 2024, (b) $2,500 for the period of May 1, 2024 through and including May 31, 2024 and (c) $0 at all other times, (v) add a minimum Consolidated EBITDA (as defined in the Credit Agreement) financial maintenance covenant, and (vi) amend certain negative and affirmative covenants and add certain additional covenants, all as more particularly set forth in such amendment.

There can be no guarantee or assurances that any such transaction or transactions be consummated.

During the 13 weeks ended July 29, 2023, we incurred debt issuance costs totaling $11.0 million related to the July 2023 Credit Agreement amendment.

As of July 29, 2023, and through the date of this filing, we were in compliance with all debt covenants under the Credit Agreement.

The Credit Facility is secured by substantially all of the inventory, accounts receivable and related assets of the borrowers under the Credit Facility.

This is considered an all asset lien (inclusive of proceeds from tax refunds payable to the Company and a pledge of equity from subsidiaries, exclusive of real estate).

During the 13 weeks ended July 29, 2023, we borrowed $145.2 million and repaid $49.6 million under the Credit Agreement, and had outstanding borrowings of $249.7 million as of July 29, 2023, comprised entirely of borrowings under the Credit Facility.

During the 13 weeks ended July 30, 2022, we borrowed $117.2 million and repaid $112.6 million under the Credit Agreement, and had outstanding borrowings of $230,300 as of July 30, 2022, comprised $190.3 million and $40.0 million of borrowings under the Credit Facility and FILO Facility, respectively.

As of July 29, 2023 and July 30, 2022, we have issued $0.6 million and $4.8 million, respectively, in letters of credit under the Credit Facility.

On June 7, 2022, we entered into a Term Loan Credit Agreement (the “Term Loan Credit Agreement”) with TopLids LendCo, LLC and Vital Fundco, LLC and we entered into an amendment to our existing Credit Agreement, which permitted us to incur the Term Loan Facility (as defined below).

For additional information, see the Company’s Report on Form 8-K dated June 7, 2022 and filed with the SEC on June 10, 2022.

The Term Loan Credit Agreement provides for term loans in an amount equal to $30.0 million (the “Term Loan Facility” and, the loans thereunder, the “Term Loans”).

The Term Loan Credit Agreement provides for term loans in an amount equal to $30.0 million (the “Term Loan Facility” and, the loans thereunder, the “Term Loans”) and matures on June 7, 2024.

The proceeds of the Term Loans are being used to finance working capital, and to pay fees and expenses related to the Term Loan Facility.

During the 39 weeks ended January 28, 2023, we borrowed $30.0 million and repaid $0 under the Term Loan Credit Agreement, with $30.0 million of outstanding borrowings as of January 28, 2023.

We incurred debt issuance costs totaling $2.6 million related to the Term Loan Credit Agreement.

During the 13 weeks ended July 29,

2023, we borrowed $0 and repaid $0 under the Term Loan Credit Agreement, with $30.0 million of outstanding borrowings as of July 29, 2023.

During the 13 weeks ended July 30, 2022, we borrowed $30.0 million and repaid $0 under the Term Loan Credit Agreement.

March 2023 Term Loan Credit Agreement Amendment

On March 8, 2023, we amended the Term Loan Credit Agreement to (i) extend the maturity date of the Term Loan Credit Agreement by six months to December 7, 2024, (ii) permit the application of certain proceeds to the repayment of the loans under Credit Agreement and (iii) amend certain negative covenants and add certain additional covenants to conform to the Credit Agreement.

In addition, the amendment requires the achievement of a Specified Event (as described above) by no later than May 31, 2023 (as such date may be extended under the Credit Agreement, but no later than August 31, 2023 without consent from lenders under the Term Loan Credit Agreement).

During the 52 weeks ended April 29, 2023, we incurred debt issuance costs totaling $0.4 million related to the March 2023 Term Loan Credit Agreement amendment.

We paid a fee of $0.05 million on the amendment closing date to the lenders under the Term Loan Credit Agreement.

July 2023 Term Loan Credit Agreement Amendment

We must pay a fee of $0.05 million to the lenders under the Term Loan Agreement on the earlier of September 2, 2024 and the Termination Date (as defined in the Term Loan Agreement).

During the 13 weeks ended July 29, 2023, we incurred debt issuance costs totaling $0.4 million related to the July 2023 Term Loan Credit Agreement amendment.

The debt issuance costs have been deferred and are presented as prepaid and other current assets and other noncurrent assets in the consolidated balance sheets, and subsequently amortized ratably over the term of the Term Loan Facility.

The Term Loans accrue interest at a rate equal to 11.25%, payable quarterly, and mature on June 7, 2024.

We have the right, through December 31, 2022, to pay all or a portion of the interest on the Term Loans in kind.

To date, all interest on the

term loan has been paid in cash.

The Term Loans accrue interest at a rate equal to 11.25%, payable quarterly.

To date, all interest on the term loan has been paid in cash.

The Term Loans do not amortize prior to maturity.

Solely to the extent that any Term Loans remain outstanding on June 7, 2023, we must pay a fee of 1.5% of the outstanding principal amount of the Term Loans on such date.

On March 8, 2023, subsequent to quarter end, we extended and amended the Term Loan Credit Agreement to (i) extend the maturity date of the Term Loan Credit Agreement by six months to December 7, 2024, (ii) permit the application of certain proceeds to the repayment of the loans under Credit Agreement and (iii) amend certain negative covenants and add certain additional covenants.

In addition, the amendment requires the achievement of a Specified Event (as described above) no later than May 31, 2023.

We paid a fee of $0.05 million on the amendment closing date to the lenders under the Term Loan Credit Agreement.

For additional information related to the Credit Agreement amendment and the Term Loan Agreement amendment, see the Company’s Report on Form 8-K dated March 8, 2023 and filed with the SEC on March 9, 2023.The Term Loan Credit Agreement does not contain a financial covenant, but otherwise contains representations and warranties, covenants and events of default that are substantially the same as those in the Credit Agreement, including restrictions on the ability of the Company and its subsidiaries to incur additional debt, incur or permit liens on assets, make investments and acquisitions, consolidate or merge with any other company, engage in asset sales and make dividends and distributions.

The Term Loan Credit Agreement does not contain a financial covenant, but otherwise contains representations and warranties, covenants and events of default that are substantially the same as those in the Credit Agreement, including restrictions on the ability of the Company and its subsidiaries to incur additional debt, incur or permit liens on assets, make investments and acquisitions, consolidate or merge with any other company, engage in asset sales and make dividends and distributions.

The Term Loan Facility is secured by second-priority liens on all assets securing the obligations under the Credit Agreement, which is all of the assets of the Company and the Guarantors, subject to customary exclusions and limitations set forth in the Term Loan Credit Agreement and the other loan documents executed in connection therewith.

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As a result of the tax year-end change, there is no longer a long-term tax payable associated with the LIFO reserve in other long-term liabilities.

We have filed our federal income tax returns for the tax year ended January 2021, which included claims for $33.6 million in refunds for cash taxes paid in prior years.

We received refunds of $7.8 million in Fiscal 2022 and $15.8 million on August 29, 2022 (Fiscal 2023).

As of July 29, 2023, we recognized a current income tax receivable for net operating loss carrybacks in prepaid and other current assets on the condensed consolidated balance sheet.

We received refunds of $7.8 million in Fiscal 2022 and a $15.8 million refund in Fiscal 2023.

We expect to receive additional refunds of approximately $10.0 million.

Share Repurchases

During the 39 weeks ended January 28, 2023, we did not repurchase any of our Common Stock under the stock repurchase program.

As of January 28, 2023, approximately $26.7 million remains available under the stock repurchase program.

During the 39 weeks ended January 28, 2023, we repurchased 347,808 shares of our Common Stock outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.

During the 13 weeks ended July 29, 2023, we did not repurchase any of our Common Stock under the stock repurchase program.

As of July 29, 2023, approximately $26.7 million remains available under the stock repurchase program.

During the 13 weeks ended July 29, 2023, we repurchased 77,898 shares of our Common Stock outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.

Contractual Obligations

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Off-Balance Sheet Arrangements

As of January 28, 2023, we have no off-balance sheet arrangements as defined in Item 303 of Regulation S-K.

As of July 29, 2023, we have no off-balance sheet arrangements as defined in Item 303 of Regulation S-K.

Critical Accounting Policies

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Such statements reflect our current views with respect to future events, the outcome of which is subject to certain risks, including, among others:

• risks associated with public health crises, epidemics, and pandemics, such as the COVID-19 pandemic, including the duration, spread, severity, and any recurrences thereof, and the impact such public health crises have on the overall demand for BNED products and services, our operations, the operations of our suppliers and other business partners, and the effectiveness of our response to these risks;

• the amount of our indebtedness and ability to comply with covenants applicable to current and /or any future debt financing;

• our ability to satisfy future capital and liquidity requirements;

• our ability to access the credit and capital markets at the times and in the amounts needed and on acceptable terms;

• our ability to maintain adequate liquidity levels to support ongoing inventory purchases and related vendor payments in a timely manner;

• our ability to attract and retain employees;

• the pace of equitable access adoption in the marketplace is slower than anticipated and our ability to successfully convert the majority of our institutions to our BNC First Day ® equitable and inclusive access course material models or successfully compete with third parties that provide similar equitable and inclusive access solutions;

• the strategic objectives, successful integration, anticipated synergies, and/or other expected potential benefits of various strategic and restructuring initiatives, may not be fully realized or may take longer than expected;

• dependency on strategic partnerships, such as with VitalSource Technologies, Inc.

and the Fanatics Retail Group Fulfillment, LLC, Inc.

(“Fanatics”) and Fanatics Lids College, Inc.

D/B/A "Lids" (“Lids”) (collectively referred to herein as the “F/L Partnership”), and the potential for adverse operational and financial changes to these partnerships, may adversely impact our business;

• non-renewal of managed bookstore, physical and/or online store contracts and higher-than-anticipated store closings;

• decisions by colleges and universities to outsource their physical and/or online bookstore operations or change the operation of their bookstores;

• general competitive conditions, including actions our competitors and content providers may take to grow their businesses;

• the risk of changes in price or in formats of course materials by publishers, which could negatively impact revenues and margin;

• changes to purchase or rental terms, payment terms, return policies, the discount or margin on products or other terms with our suppliers;

• work stoppages or increases in labor costs;

• possible increases in shipping rates or interruptions in shipping services;

• a decline in college enrollment or decreased funding available for students;

• decisions by colleges and universities to outsource their physical and/or online bookstore operations or change the operation of their bookstores;

• implementation of our digital strategy may not result in the expected growth in our digital sales and/or profitability;

• risk that digital sales growth does not exceed the rate of investment spend;

• the performance of our online, digital and other initiatives, integration of and deployment of, additional products and services including new digital channels, and enhancements to higher education digital products;

• the inability to achieve the expected cost savings during the anticipated time frame, and the inability to implement our cost saving initiatives in a timely and efficient manner;

• the risk of price reduction or change in format of course materials by publishers, which could negatively impact revenues and margin;

• the general economic environment and consumer spending patterns;

• decreased consumer demand for our products, low growth or declining sales;

• the strategic objectives, successful integration, anticipated synergies, and/or other expected potential benefits of various acquisitions, may not be fully realized or may take longer than expected;

• the integration of the operations of various acquisitions into our own may also increase the risk of our internal controls being found ineffective;

• changes to purchase or rental terms, payment terms, return policies, the discount or margin on products or other terms with our suppliers;

• our ability to successfully implement our strategic initiatives including our ability to identify, compete for and execute upon additional acquisitions and strategic investments;

• the general economic environment and consumer spending patterns;

• trends and challenges to our business and in the locations in which we have stores;

• risks associated with operation or performance of MBS Textbook Exchange, LLC’s point-of-sales systems that are sold to college bookstore customers;

• technological changes;

• technological changes, including the adoption of artificial intelligence technologies for educational content;

• risks associated with counterfeit and piracy of digital and print materials;

• our international operations could result in additional risks;

• our ability to attract and retain employees;

• risks associated with data privacy, information security and intellectual property;

• trends and challenges to our business and in the locations in which we have stores;

• non-renewal of managed bookstore, physical and/or online store contracts and higher-than-anticipated store closings;

• disruptions to our information technology systems, infrastructure and data due to computer malware, viruses, hacking and phishing attacks, resulting in harm to our business and results of operations;

• disruptions to our information technology systems, infrastructure, data, supplier systems, and customer ordering and payment systems due to computer malware, viruses, hacking and phishing attacks, resulting in harm to our business and results of operations;

• disruption of or interference with third party web service providers and our own proprietary technology;

• work stoppages or increases in labor costs;

• possible increases in shipping rates or interruptions in shipping service;

• product shortages, including decreases in the used textbook inventory supply associated with the implementation of publishers’ digital offerings and direct to student textbook consignment rental programs, as well as the risks associated with the impacts that public health crises may have on the ability of our suppliers to manufacture or source products, particularly from outside of the United States;

• risks associated with the impact that public health crises, epidemics, and pandemics, such as the COVID-19 pandemic, have on the overall demand for BNED products and services, our operations, the operations of our suppliers and other business partners, and the effectiveness of our response to these risks;

• lingering impacts that public health crises may have on the ability of our suppliers to manufacture or source products, particularly from outside of the United States;

• changes in domestic and international laws or regulations, including U.S.

tax reform, changes in tax rates, laws and regulations, as well as related guidance;

• enactment of laws or changes in enforcement practices which may restrict or prohibit our use of texts, emails, interest based online advertising, recurring billing or similar marketing and sales activities;

• the amount of our indebtedness and ability to comply with covenants applicable to any future debt financing;

• our ability to satisfy future capital and liquidity requirements;

• our ability to access the credit and capital markets at the times and in the amounts needed and on acceptable terms;

• enactment of laws or changes in enforcement practices which may restrict or prohibit our use of texts, emails, interest based online advertising, or similar marketing and sales activities;

• adverse results from litigation, governmental investigations, tax-related proceedings, or audits;

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis